Many businesses fail because of financial mistakes that put them in a bind, but these mistakes are avoidable; and knowing what they are before you make them will help your business from going under. Here are the top 5 mistakes and how to avoid them.
Lots of employers will hire before there is enough revenue tallied up to pay the employee. Hiring employees is one of the most important financial decisions that a business ever makes. It can be exciting when you are making enough widgets to need someone’s help, but it might be a good idea to hire a temp employee or an independent contractor to test the waters instead of a full time employee so that you don’t have to keep the person on your team if times get tough or you’re not exactly sure what you need. You will outgrow people pretty quickly when you first start building your team most likely.
Businesses often also take out loans even if they don’t need it. Some business owners think they may need it down the road, so they will take out the loan anyway, since their bank is willing to lend it to them. Remember though that most of us are susceptible to “goldfish syndrome,” which means that if a resource is there—we use it and “fill the bowl.” Then your business doesn’t have the means to pay back the loan, and your find yourself in a real pickle. Lesson learned; never borrow money unless you really need it.
Not charging enough for goods and services is also another financial mistake businesses make, and it is so easy to avoid. To make sure that your business doesn’t fall into this category, do a little research about your services and see what others are charging for it. Then, raise your rates accordingly. It is crucial to the health of your business that you charge the appropriate amount for what you have to offer. I’ll be covering this topic in my June complimentary teleclass, Passion PLUS Products EQUALS Profits.
If you have a lot of accounts receivables, then you are giving too much credit to too many people. Turning your business into a bank—unless of course you are a bank—is never a good idea. Some clients will take advantage of you and will never pay you back, so cut back on the accounts receivable if you can, or better yet consider having your clients pay a retainer up front.
And one final financial mistake many businesses make? Not diversifying your income streams. If you put all your eggs in one basket, then you are limiting yourself and should expand so different types of clients can pay you in different ways for different products and services. You’ll reach more people and will ensure the success of your business. Remember, people need to hear the same message a number of different ways before they take action, so you need price points and packages for your business that appeal to different levels all the way from free to VIP. Creating value added packages and signature products is crucial to set you above a competitive marketplace.
Not sure you’re ready to hire? Stuck on how to create products and price points for your clients and customers? Join the discussion on the Blog, join a free Teleclass, or set up a complimentary 30 minute consultation to plan YOUR next steps.