If you’re a business owner, the latest stats from the Bureau of Labor Statistics aren’t good news.
According to the BLS, 20 percent of businesses fail within the first year, no matter the economic conditions.
But that’s not the worst of it.
Fifty percent fail within five years and 30 percent fail by their 10th year. That’s the bad news, and it makes starting a business look daunting, no matter how passionate you are about your product or service.
So, how do you set yourself up so that you don’t become a statistic?
Well, that’s exactly why I wrote this! Here are the five mistakes you want to avoid as you’re making the BIG financial decisions in your business.
1. Failing to pay attention to cash flow. Owners get so wrapped up in their businesses that they’re not paying attention to the things they need to pay attention to, especially cash flow. According to data from US Bank, 82 percent of startups and small businesses fail due to poor cash flow management. That’s a HUGE number!
Why aren’t you paying attention to cash flow??? Is it because you don’t have the data in front of you? Is it because you’re too busy running your company? Or is it because you really don’t like the financial stuff? Don’t feel bad.
A lot of people don’t. But if 82 percent of start-ups and small businesses fail because they’re not paying attention to cash flow, you need to get help. Find someone like me who’s going to keep you informed, prevent surprises, and keep you on the right track.
2. Not paying yourself. As a small business owner, your personal finances are as important as those of your business. And typically, all of your finances are highly interconnected. If you’re paying yourself a fair salary you’re less likely to be burdened by worries about how you are going to pay your bills.
If you’re not, check out my previous blog – Are you your lowest paid employee? Let’s get real here. With the latest tax law changes for small businesses, you could be paying higher overall taxes by not paying yourself! Be kind to yourself and pay you for the work that you do.
3. DIY Syndrome. I’ve written about this affliction on multiple occasions, where owners feel like they have to do it all themselves. Business owners take on tasks “because they must be done,” not because it’s a good match for their skillset. They get distracted and pulled away from the very activities that they are uniquely qualified for in their business.
That’s their uniqueness in the marketplace and they’re diluting it by doing things themselves that should be hired out. Do yourself a favor and hire help so that you can maintain a laser focus on your business. You have the passion and energy to move it forward. (To learn more about the perils of DIY, click here.) You can’t afford not to.
4. Ignoring (or not knowing) your margins. Many owners are so focused on growing revenue that they don’t know if those sales are actually profitable for the company. If it costs $1,200 to produce $1,000 in sales, shouldn’t you be concerned?
The answer, obviously, is yes, but honestly, there are people out there who don’t know how much it costs them to produce that revenue. Not understanding what your margins are will sink you…and fast! Don’t make this serious mistake.
5. Failing to consult the professionals. Do you want to be the one who says “if only I hadn’t tried to do it myself I would have saved $100,000?” Of course not! (Check out my blog post to learn more.) You need a board of advisors to lean on throughout the year.
You need a CPA for tax advice & planning, an attorney to keep you clear of legal messes, and a CFO, especially, for year-around quarterbacking. Assemble your “A-Team” to take you and your business to the next level.
Don’t become a statistic by making these mistakes. Your business needs big-picture thinking, accountability and a path forward, all things that a CFO can bring.
If you’re ready to make those big decisions with complete clarity and confidence, let’s talk.