Being an entrepreneur calls for you to be more vigilant and as such the learning process never ever stops. There may be a plethora of success stories that led them to becoming billionaires within a matter of days.
However, your goal is essentially to take inspiration from them and not to ape them blindly especially in the absence of a definitive financial plan. When you have just stepped into the vicarious business world, you are bound to make errors.
Some financial errors can be corrected with the help of DIY debt settlement while others call for elaborate procedures that can be excruciatingly daunting and can take a toll on you.
1. Not being realistic enough
Being an entrepreneur essentially is driven by proofs and validations as opposed to emotional triggers. Therefore, if you have an idea that you believe can change the face of a particular industry, the best thing that you can do is realistically talk to certain important people like consultants, experts in the field and most importantly the consumers, who are the ultimate buyers of your product. Once you get a viable feedback from them should you begin designing your strategy. Just because you like an idea does not mean the entire world will comply with the same. Never make assumptions and even if you do, ensure that you have the necessary data to back it up.
2. Failing to include certain financial essentials when planning
When dealing with financial projections there are certain factors that may seem trivial but in fact, have a very high impact on how your business turns out financially. Therefore, when drawing up a pro forma, you must never forget to include these aspects. They are basically items or services that either bring in cash flow or take the money out from the business in the form of taxes, insurance, depreciation, employee benefits and the likes.
3. Understanding bad debts
Usually, no matter how stringent your policies are and how efficiently you carry them out, you are likely to face a situation wherein you will fail to receive the amount that you owe from clients and customers. As an entrepreneur, it is next to impossible to have your customer pay you the entire amount in full before receiving the product or service and therefore, deciding on an approximate percentage as bad debts is a must. This will help you in the process of DIY debt settlement if the need ever does arise.
4. Failing to understand how fundraising works
If you want capital for your business, you may want to consider certain fundraising tactics. However, it may not always work. When it comes to fundraising there are umpteen options at your disposal ranging from crowdfund to bootstraps and even venture capital raising. However, you need to select the one that is best for you only after consulting with experts.
5. Not making the financial distinction
There are many entrepreneurs who do not keep their business and personal finances distinct. While it has its own set of benefits, the disadvantages provided by doing so can easily overpower the benefits.
To put it simply, combining both finances can lead to utter chaos and the failure of one can invariably cause the failure of the other. Therefore, it is best to keep these two finances separate and deal with them separately.
Learning from your financial mistakes and taking corrective steps is important. For those who have only recently entered into business as young entrepreneurs, this list of common errors will keep you on your toes and keep you from falling into financial traps.
What errors have you made as an entrepreneur ? Let us know using the comment form bellow.