Key Financial Mistakes to Avoid When Looking to Start Your Very First Business

All those success stories of people who dared to start their own business and came out of it rich enough to be financially comfortable for the rest of their lives often bear the same message: if they can do it, you can too. Thus, you may have found yourself being easily swayed into thinking of starting your own business as well. So, you begin saving up until the right time comes for you to finally begin putting your thoughts of starting your own business into action. But since you’d be embarking on an endeavor that entails a huge amount of risk compared to the security of having a 9-to-5 job, you would want to avoid some financial mistakes that can cause you to give up on your very first business and forget that you even tried to start one yourself.

Starting Your Very First Business Is All About Making and Being Wise About Money

Trying to start your very first business isn’t merely about setting your ideas of being your own boss and becoming a self-made person into motion as you would also have to ensure that you’re making money out of your venture.

  • Unless you’re running a non-profit organization or something similar, the objective of every business – no matter how small or big they are – is to make money, so it follows that anyone who wants to start their own business should know how to be financially responsible so that they wouldn’t run out of money that keeps their business afloat.
  • Some people though who try to set up their own businesses tend to manage their finances so poorly that they’re unable to pay even all the basic expenses that come with running a business.
  • As every business runs on money, one that doesn’t have enough of it to keep going may not live to see another day.

What Are Some of the Financial Mistakes That You Should Avoid When Looking to Start Your Very First Business?

As a beginner who’s looking to start your very first business, you might initially find yourself committing blunders that might test your patience and tolerance for failure. While some of them, like setting up a business in a global economy that might not be bound to get better anytime soon, are completely out of your control, you can prevent most of those mistakes from happening to you, especially if they involve the money that fuels your business. To help you manage your finances properly while you’re starting out with your business venture, here are some financial mistakes that you should avoid from the get-go:

1. Placing yourself in too much debt that you might not be able to pay it back

The money that you’ve saved up so that you can start your own business might not be enough, so you borrow some money from your bank for you to use as additional capital.

  • Not paying back your debts is sure to ruin both your financial standing and reputation, as people might not want to deal with you and look to some other more reputable business instead.
  • You would have to make sure that your business can turn enough profit for you to pay back the money that you’ve borrowed.

2. Not paying yourself a salary

You may be your own boss in the business that you’ve set up, but it doesn’t mean that everything you do has to be for free.

  • As you put out more than the required amount of work being asked of you to keep your business running as smooth as possible, you should give yourself enough money as a reward for a job well done.
  • Getting yourself paid allows you to stay focused and motivated to build your business further.

3. Splurging on major purchases for your business

You’d be forgiven for wanting nothing but the best things that your business might need, but you also have to ask yourself if the huge amounts of money that you’ll be spending for them are worth it in the end or not.

  • Since you’re still looking to start your own business, you might want to spend on what it absolutely needs first before everything else.
  • You would also want to check if there are any cheaper alternatives that can benefit your business very much the same way as the fancier choices that you initially considered.

4. Not saving up for emergencies

Trying to run and maintain your own business is often full of surprises, though some of them might financially ruin you if you haven’t got any backup cash at hand.

  • As much as you want to remain optimistic while running your business, you would also have to foresee any worst-case scenarios that might happen to it in the near future.
  • Much like when you had saved up a portion of the money that you received from having to work for somebody else, you would also have to set aside part of the profits that you’re generating as a rainy-day fund that you can use if ever you have to deal with emergency situations concerning your business.

5. Not keeping business and personal accounts completely separate

Same as you had to separate work and life when you were still holding down a 9-to-5 job, you would also have to divide your money into what should be used for business purposes only and what you can spend out of it.

  • Having a business account that’s completely separate from your personal one helps you more clearly define the money that your business truly needs for it to stay operational.
  • Setting up a business account also makes it easier for you to track down any expenses that you’ve made as part of making your business grow instead of taking a portion of money out of your personal account and not accounting for it.

6. Not breaking down major business goals into more easily attainable ones

Most people starting out in their respective businesses tend to commit themselves to accomplishing objectives like becoming a multi-millionaire over a short period of time¾and they eventually find it difficult to keep track of and may lose focus.

  • Instead of aiming to reach for the stars, you should break down your business goals into chunks that you strongly believe you could achieve.
  • You can also set milestones for you to complete so that you can garner some much-needed confidence boost that you’ll need for your business endeavor.

If you’ve been working a 9-to-5 job for who knows how long and want to regain control of your life, the mere idea of starting your very first business might sound like a rather appealing idea to you. But if you’re expecting to make it like those success stories of business owners that inspired you to take the path that they took as well, you would have to avoid the financial mistakes mentioned above when you’re looking to start your very first business. That way, you won’t have to join the rest of those people who tried setting up their own businesses but eventually had to close shop because of their poor financial management.