The 7 Biggest Financial Mistakes Businesses Make
The 7 Biggest Financial Mistakes Businesses MakeÂ
Running a business should earn you an honorary degree given all you will learn, writes Brian Hamilton, co-founder and CEO of Sageworks, over at Inc. Â Â
We live and we learn.Â In the time itâ€™s taken me to build two companies, I have learned and more importantly, lived, these mistakes. I hope these pieces of advice can help both aspiring and existing entrepreneurs succeed in starting and running their own businesses. Here are theÂ CliffNotes, the mistakes you should hear now and avoid.
1.Â Â Â Hiring in advance of revenue.Â There is a common expression: “Don’t count your money until it is in the bank.” There is great wisdom in this. Many times in business, we receive contracts or the promise of revenue. However, there is a major difference between having revenue and almost having it. Until revenue actually hits the bank account, you don’t have it, and you must overcome the tendency to be optimistic and hire too many people before the revenue is real. This one principle or mistake could be its own manifesto.
2.Â Â Â Borrowing money when you don’t really need it, but when the bank is willing to lend it.Â Just because a bank is willing to lend you money does not mean you should accept it. The bank is in business to collect interest and not to optimize your financial performance. Sometimes these two goals meet somewhere near the middle, but it is not as often as you might think. It’s not that bankers seek to take advantage of businesspeople; it’s only that their objectives and yours are very different. In general, borrow as much as you need to grow your business. The problem with credit is not that there is too little available; it is that people get too much of it. Borrowing money adds a huge burden to your business, a stress that can often cascade into your personal life.
Hamilton lists other mistakes including:
- Not paying payroll taxes on time.
- Pricing too low.
- Permitting accounts receivable.
- Counting on one major source of revenue.
- Hiring too much overhead.