Avoid These Mistakes That Can Cripple Your Business
When you're running a business, it's easy to get caught up in the day-to-day operations. However, if you don't keep your eye on the big picture, you could end up making mistakes that undermine your growth or send you into bankruptcy. To stay on the right track, be on the lookout for these mistakes that we've seen many businesses make.
Especially in the early stages of a business, it's important to watch your spending. But remember the old sayings "don't be penny wise but pound foolish" and "I can't afford to buy cheap things."
Everything in business has a cost that goes beyond the invoice price. The machine that costs double might last four times as long. Upgrading to a slightly more efficient tool could save you thousands of dollars in labor costs.
Once you establish steady profits, repeat customers, and a stream of new referrals, it's not time to sit back and relax. Business and economic cycles mean even your best customers will have changing needs. Competitors will always be looking for ways to take your customers by doing things better, faster, or cheaper.
If you only try to innovate or bring in new business when things slow down, things will get worse before they get better. It takes time to build up new income streams, and gaps between one line of business going down and a new line taking its place can lead to crippling debt or cutbacks that make it almost impossible to move forward.
Lack of Diversification
Lack of diversification is another brand of complacency. When all or most of your revenue comes from a single product line or a small handful of customers, your risk increases. One customer suffering a downturn or decreasing demand for a key product could quickly wipe out your profit margins.
At times, a narrow focus might be ideal, but you need to be aware of the risks. Keep looking for ways to diversify and make sure you have a contingency plan to get through any slowdowns caused by a deliberate lack of diversification.
Taxes aren't just something to think about in March or April. The only thing you can do at that point is add up your bill and pay it.
Planning for tax season early in the year allows you to limit how much you need to send to the government. You can take advantage of limited-time deductions and credits, time expenses for years when you expect to pay higher tax rates and limit what you'd spend on interest and penalties if you received an unexpectedly higher tax bill.
A solid budget is important even when you have strong profits. This includes both for your income and expenses as well as your cash flow.
Not making sure your expenses are in line with your income could mean that the small expenses that you think are insignificant could add up to an amount that wipes away your profit. Not making sure you have enough cash coming in before key bills are due could mean a cash crunch, late fees, or even credit defaults.
Not Seeking Professional Advice
You can learn by trial and error instead of getting help from a pro, but the small errors will slow your growth, and a large error could end your business. Our experience working with hundreds of small businesses across many industries lets us see what works and what doesn't.
We provide ongoing business consulting services to help you avoid the mistakes that other businesses have made as well as bookkeeping services to help with your budgeting and tax planning. To learn more about how we can help you grow, contact us today to schedule a consultation with one of our accountants.