Recent studies show that only 30% of new businesses are still in operation by their tenth year. Put simply, surviving long-term within the startup economy is no easy feat - if you want to give your company the best chances of success, it’s important to familiarize yourself with the most common financial pitfalls. Here are a few to consider.
Budget Adherence
Setting a budget is one thing, sticking to it is another. If you want to ensure that you don’t drift from your financial commitments, you’ll need to carry out regular financial reviews (checking on your balance sheet and factoring in any upcoming costs), shop around for new services/suppliers, and show decisiveness when it comes to cutting down or cutting off needless expenses.
Debt
It’s common for a small business to fall into debt, especially if you have not received external investment. Once you’ve taken out a loan, this happens as a result of late invoicing, poor accounting, inaccurate forecasting, or failure to execute your strategy. Ultimately, if you’ve mismanaged finances, debt will be soon to follow and is sure to debilitate your business. The key to avoiding this scenario is to carry out plenty of research - with enough prior analysis, you can get a measure of the market and allocate your resources in a more smart, efficient manner.
Bad Hires
At the early stage of the business process, hiring the wrong individuals can have a significant detrimental impact. When your success is reliant on the hard work and dedication of just a few team members, even one weak link represents poor investment and can end up costing you more time and money than you have to spare. If you want to avoid bringing in the wrong people, try to prioritize experience and carry out a thorough screening of all applicants.
Tech
Tech or, rather, the failure to incorporate tech efficiently can easily contribute to the downfall of a business. It may be tempting to bank on a popular software or lean too heavily on developers to carry your business but if these decisions come at high recurring costs and don’t pay off, they can quickly impact your bottom line.
Avoid this by ensuring that every program is justified on your balance sheet - regular invoicing or quick payment options, for example, are likely to have a positive impact on cash flow and company revenue. You may want to consider adding a balance API to your app or website. This will automatically verify in real-time whether clients/customers have the requisite funds in their accounts to pay. An API will also securely verify customer data without risking their personal information.
Financial Analysis
When you’re trying to run a successful small business, you won’t always have the time (or expertise) to assess risk, monitor finances, or conduct regular analyses but doing so could prove pivotal to the company’s survival. That’s why it’s sometimes worth bringing in consultants like Leshinsky Finance to lend an expert opinion - the right advice can help you to refine your business process and identify any pain points that would otherwise lead you to ruin.
When it comes to running a business, fiscal conservatism will often play to your advantage. If you can tread cautiously, allocating resources and spending capital with a keen eye on your budget sheet, you’ll be more likely to lead your team and your company to long-term success.
Leshinsky Finance understands the importance of wise strategic and financial planning during all the phases of the business cycle, contemplation to maturation and possible sale of the business. Learn more about our services, at leshinskyfinance.com
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