Overcoming mistakes in money management is one of the biggest challenges facing small business owners. The U.S. Small Business Administration states that half of small business startups don’t make it past the five year mark, and surveys show that some of the main reasons are difficulties in growing revenue and managing cash flow.
Here are some strategies to help you avoid these common errors.
Create a Business Plan
A business plan serves as a blueprint and road map to help you measure your success and plan for the future. It’s also a tool to highlight your business for investors. A good business plan should include an executive summary, a profile of your company, a market analysis, and an outline of your management and organizational structure. Don’t forget a description of your products or services, financial projections, and a funding request.
Keep Business and Personal Finances Separate
Overcoming mistakes in business includes having a dedicated account for your company finances. This keeps your business transactions separate from your personal spending. The need for this may not seem obvious in the beginning, but as your business finances become more complex, you’ll be glad you did it.
Prepare for Taxes
Taxes for small business owners are more complex than those for employees. You may need to pay estimated quarterly income taxes. There may also be additional state taxes and other taxes that impact the industry in which you work.
Use Debt to Manage Cash Flow
Although you may have set up your small business with a resolution not to go into debt, in fact small business loans and lines of credit help you manage uneven cash flow. A moderate loan may be just the thing to keep your cash flow strong and spur continuing growth.
Plan for Emergencies
As an entrepreneur, you always hope for the best, but sometimes unexpected emergencies arise that threaten the prosperity of your company. To prevent these circumstances from causing your business to fail, build up an emergency reserve of operating expenses to get you through hard times.
For more advice on avoiding mistakes in small business money management, contact 5 Star Funding Group.
