Did you just start a small business? Possibly you have had one for a while but you feel like you are spinning your wheels. Are you hungry for financial success? We've compiled a list of six common mistakes that small business owners make so that you can learn to avoid them and take your business to the next level.
#1: Failing to spend time planning
Planning is one of the most vital parts of running a business. As Stephen Covey’s teachings recommend, “begin with the end in mind”. Even if you are just a one person start-up, it is critical to have a business plan that lays out your operational and financial strategies.
A good business plan can help you attain both short-term and long-term objectives and let you recognize potential pitfalls. Planning and mapping out the process will provide clarity, encourage accountability and promote a sense of urgency in achieving your business goals.
As your business evolves, so will your planning. But we can not stress enough the importance of being proactive in planning up front to help you develop operational efficiencies and strategic decision making skills.
#2: Mixing business and personal funds
Using the same accounts and cards to fund your personal and business expenses might be convenient. But when tax time rolls around, that’s the moment you’ll start to regret what you’ve done as unintentional and avoidable tax nightmares arise.
First, the co-mingling of business and personal finances can result in substantially increased tax preparation fees arising from the need to sort out expenses. Second, it can result in an increased tax liability due to penalties for false deductions. Finally, it greatly increases the likelihood of facing an IRS audit, which could also end up costing you additional professional fees and penalties.
That's why separating your business and personal finances is something all business owners should do to save money, avoid unnecessary headaches and make sure that you get the most out of your tax rebate. Setting your expenses apart will also allow you to have a clear picture of your personal and professional business finances throughout the year to aid you in daily decision making and identify tax planning strategies.
#3: All work and no play
Running your own business is hard work. There is no doubt about that. However, without proper relaxation, you will become increasingly less productive.
Take a walk. Join a gym and work out during your slow hour. Talk to people along the way. The people you encounter may just be future customers, and you’ll be building a healthier you for tomorrow along the way.
#4: Taking your existing clients for granted
Stop looking after your existing clients and they may just go elsewhere. Today, the Internet, smartphones and general accessibility have made it easier than ever for customers to find your competitors and discover new options.
Take a moment to recognize that without those existing customers you wouldn’t be in business and make sure they know just
how much you really appreciate them. How about sending a gift for your clients on special occasions? Or contacting customers just to tell them how much you appreciate their business?
A happy customer is a valuable business asset, now and in the future.
#5: Not asking for referrals
As stated above, your existing, happy customers are a major business asset. That asset can also produce benefits in many ways, but you have to ask. Instead of spending a lot of money on your advertising, why not ask customers for referrals? Referrals are the cheapest and easiest way to grow your business.
#6: Ignoring your numbers
As your business grows, it is necessary to understand basic accounting so you can monitor your financial performance and avoid risks such as cash flow problems, misappropriation, or worse - bankruptcy.
In order to ensure that you are maintaining your books properly and meeting all of your financial responsibilities, you can enroll yourself in online training courses to gain accounting knowledge for your business. Another option is to hire a Bookkeeper who will handle your day-to-day accounting transactions and an Accountant for more complex accounting issues.
Did anything from this list resonate with you? Have you been guilty of any of these? I would encourage you to do a bit of exploration to see how you can make changes in these areas. In my experience they pay dividends over time!
If you think you may need accounting help, our team of experts here at Allison L. Reynolds, CPA PLLC are available to assist you. Give us a call at (615) 823-3480 or you can schedule a FREE consultation with us.
We look forward to talking with you and seeing your business grow!