When it comes to money matters, steer clear of these business mistakes
As a Business Coach, I’ve worked with a lot of business owners faced with crucial decisions on a daily basis. These concerns come from several aspects of the business – from marketing, managing employees, dealing with suppliers and gathering and analysis of data. But one of the most pressing matters when it comes to business is managing finances.
Previously, 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
Managing finances is a sensitive part of running a business, because when done poorly, a lot of the major functions of the company can be destabilised. There are certain money decisions that could impact the business in varying degrees, that’s why it’s important to be knowledgeable in how different aspects of the business affect each other. Below are common mistakes that cause a financial breakdown among businesses.
Hiring too many top-level people from the start
Employees in your business should bring in sales, create products, or serve clients. These roles are important and are the backbone of your company. The real issue is when you hire “overhead” people, who cost the business money but don’t sell or produce anything directly. 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.
Premature investments and going ‘all in’ too fast
Some business owners tend to be focused on growth with a long-term mindset. While having an established objective is essential, 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 your priorities with a definite timeframe in mind. In the early stages of business, it’s very easy to be swept up by the excitement of your new venture, so you might get hooked on impulse buying and diversifying your business too early.
You should learn how to scrutinise every bit of expense for cost-benefit, especially in the startup phase of your business. Every pound you spend should count towards moving the business forward in a reasonable, measurable and strategic way. When you’ve achieved long-term success, that’s when you’ll have the luxury of playing with your finances.
Not having a financial safety net
If your cash flow experiences a dry spell, what’s your backup plan? Some business owners don’t even think about 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 crippled can be detrimental 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.
Not acquiring 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. Discover how REACH Business Coaching can help you grow your business by attending our free workshops and seminars.
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