Financial management is a fundamental skill if you want business success
Business owners are often faced with critical decisions on a daily basis. I’ve worked with a lot of them as a Business Coach, and I know for certain that there will always be concerns that come from several aspects of the business — marketing, employee management, supplier relationships and even data analysis. Of course, one of the most pressing matters when it comes to business is managing finances.
How well do you know your numbers?
In a previous post I’ve written about the things that a business owner needs to master, and one of those things is Financial Mastery.
Related: Numbers are the language of business
Most common financial mistakes you need to watch out for
When managing financing is done poorly, a lot of the chief functions of the company can be disrupted. There are specific money decisions that could impact the business in unforeseeable degrees, that’s why it’s important to be educated on how different aspects of the business affect each other.
It’s also equally important to steer clear of mistakes that cause a business financial breakdown.
1. Going ‘all in’ too fast with premature investments
Some business owners do have the tendency to be fixated on growth with a long-term mentality even when the business is still not ready. While having a solid goal is necessary, it can also be your worst financial foe when you don’t plan it properly. As a business owner, it’s your responsibility to determine what your priorities are with a fixed timeline in mind. In the early stages of business, it’s very easy to be swept up by excitement, so you might get addicted to impulse buying and growing your business too early.
The key is to learn how to examine every bit of expense for cost-benefit, especially in the startup stage of your business. Every pound you spend should count towards moving the business forward in a reasonable, quantifiable and strategic way. When you’ve achieved long-term success, that’s when you’ll have the luxury of playing around with your finances.
2. Hiring too many top-level people in the early stages
Members of your business team should bring in sales, create products, or serve clients. These responsibilities are important and are the backbone of your company. The real issue is when you impulsively hire “overhead” people, who cost the business money but don’t sell or produce anything directly as of the moment. When your business is just starting out, it is best to keep this cost as low as you can. Of course, once your business has achieved financial growth, you can always start bringing in overhead people to help you get your business to the next level.
3. Not having a financial backup plan
If your cash flow isn’t going so well, what’s your backup plan? Some business owners don’t even plan on saving money for emergency situations. Imagine the horror of having to keep your business running without the finances to back it up. Even a short period of having your operations paralysed can be unfavorable to the long-term state of the business.
Every business owner must establish a contingency fund to save business operations from collapsing in case of a revenue drought. Set aside at least three month’s worth of finances so you always have the ability to get your business out of any rough patches and allow your company some time to recover.
4. The unwillingness to work with a financial mentor
Some business owners run the risk of completely destroying their business by not having the proper skills and guidance to manage their finances. When you know that you’re not being effective in terms of making sure your finances are solid, it’s time to seek professional mentorship. Let’s face it: not all leaders, no matter how great they are at being the captain of their business, are experts when it comes to money.
A Financial or Business Coach, just like myself, can help you gain better perspective on how to make intelligent decisions for the good of the business. My extensive clientele consists of companies based across most of the Midlands including Leicestershire, Derbyshire, Nottinghamshire and Staffordshire.
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