Today David Olson is writing for us with tips on how to keep your company growing financially. His infographic (below) shows the financial pitfalls that can happen, how they can hurt you, and how to avoid them.
Author bio: David Olson founded Virtual CFOs, LLC in 2003, long before the concept of a part-time CFO became well established. His previous 28 years of experience in private industry and public accounting made that possible. Since founding Virtual CFOs, he has helped dozens of companies improve their financial IQ, operations and prospects for success.
Here's David's advice…..
Avoid These Pitfalls To Keep Your Company Growing Financially
Starting a business is a feat of alchemy. You’re taking a dream and converting it into realty through sheer force of will. Your ideas are the core of your winning formula — and no amount of money in the bank will guarantee success. Even the most well-capitalized startups may end up closing their doors without a careful plan in place.
However, you still need a strong financial structure beneath your feet if you want to continue reaching for the prize. This is why it’s crucial for entrepreneurs to be wary of the most common pitfalls they may encounter as they develop their businesses. You can’t turn lead into gold if you don’t start out with the right material.
With that in mind, here are some of the worst money problems you can face when starting a company, and also how to avoid them. Keep these tips in mind and you should be able to pursue your startup dream without coming up short.
Starting Out Without Sufficient Funding
The most basic problem for any entrepreneur is being short of funds. Many make the mistake of running out of startup capital before they establish a firm footing. This means they must raise more cash when they should be focusing on building a customer base.
The best way to prevent this from happening is to follow proper budgeting procedures and update your cash flow projections on a regular basis. When you’re meticulous about how you spend every dollar, you’ll always know where you stand. This ensures that you won’t be surprised by an empty account when you can least afford it and when what you really need to do it keep your company growing financially.
Spending Too Much, Too Fast
“Go big or go home” is an alluring mantra for an entrepreneur with lofty ambitions. However, that attitude may lead to you spend too much on fancy offices, advanced equipment or a massive advertising campaign right out of the gate. Making those choices also can put a huge dent in your startup funds or pile on debt at a critical time.
Starting small may not be the sexiest strategy when you’re trying to make a splash in your industry. But it may be the key to surviving your first few years in business. If major purchases are absolutely necessary, look at each expenditure carefully and think two or three moves into the future. It also pays to vet your suppliers thoroughly to ensure you’ll get your money’s worth.
Not Preparing for the Future
Opening your doors to your customers is just the beginning of your corporate journey. You should never stop planning ahead. Otherwise, sudden changes to the marketplace could leave you scrambling to react. Even if you’re not in a growth mind-set right away, there’s no excuse for being caught unaware by disruptions.
Your business plan should be a living document, not a sacred text. Review it periodically and consider if it needs to be adjusted. Your customer base or product offerings should shift in response to changes in the market, and you need to be ready for them. Build a strong, but flexible, internal culture. Be certain in your convictions, but don’t let your thinking become rigid. Being able to react quickly and decisively could make all the difference to your ultimate success.
Mixing Personal and Business Finances
Getting your startup off the ground takes blood, sweat and tears — but you also may need to dip into your personal bank account. While it may be necessary, it also can be extremely risky. Not only could it expose you to liability, but you could become confused about which assets are personal and which belong to your business.
This is why you should always maintain a separate account for your company. It’s also important to establish a credit history for your business by acquiring a dedicated credit card. Whenever possible, avoid spending your personal finances for business expenses.
Transforming your dreams into reality is no small feat. That’s why you want to avoid any missteps that could stymie your formula for success. Follow this advice to keep your company growing financially, and you’ll have a much better chance of building a business that will last a lifetime.