Skip to Content

3 Money Mistakes That Will Sink Your Small Business

Whether you’re a small business owner or gearing up to start your business, knowing what mistakes will sink your small business is vital to stop it from going under. After all, no one spends time starting a business, only for it to fail in the first year! So, it’s essential you’re armed with the right knowledge, tools and strategies to avoid your business slipping into oblivion.

That said, a profitable business doesn’t simply just happen and mistakes are often made, so let me walk you through the most common pitfalls to help your business grow and survive.

1. Not Having a Plan

Successful business owners don’t act randomly – they have a solid plan in place with clear steps, goals and targets. A business plan should act as the blueprint for you to organise the structural aspects of running a business and use it for monitoring changes. Many businesses will have to write an in-depth plan, for example, a 3 or 5 year plan, to procure start-up funds. However, a common mistake is that many small business owners don’t set out goals on a monthly or quarterly basis. This can leave you in the dark when it comes to adapting your business strategies according to marketing trends, budgeting costs and developing a cash flow forecast.

In order to develop a roadmap for the success of your business, ensure you don’t ignore the importance of market research and not rely on the premise that, ‘if someone else is making money from that, so can I’. Glean as much information from the industry, your customers and marketing influencers.

2. Not Focusing on Profit

Healthy margins are at the heart of a sustainable business. If you run out of money you can’t continue. So, how do businesses make their money? Profit is usually equates to the money you have left after your expenses. Therefore, doing the maths for costs, salaries, marketing, and tracking your income and expenses is a good place to start. You should also calculate your profit margin on each and every product or service. From there, you can ascertain whether you need to boost your sales, have to cut costs, or both! This is likely to help you get fresh perspectives on the way you control your business. As a result, you’ll be able to customise your sales and production methods to fit in with both your clientele and your product. 

Focusing on profit is helped by ensuring you always include adding true value for your customers. If you offer an innovative product or service, the chances are your customers will stay loyal and trust your business as one they want to continue buying from. However, if you don’t know your business trends, then how can you make informed decisions to make your business profitable?

3. Ignoring Your Business Finances

Not setting a good financial framework to track the key numbers in your business is fatal. Don’t ignore the importance of having financial processes in place that will lay the foundation for scaling your business. Maybe you find the idea of trudging through your business finances a daunting and overwhelming chore. If ignoring your business finances sounds like you, it could be one of the money mistakes that will sink your business, as you’re probably losing money! Are you over-spending? Have you got expenses you don’t need? The only solution to this, is to keep on top of your business bookkeeping and make changes where necessary.

Checking your small business accounts weekly or monthly, will pinpoint where exactly all your money is going. It also means you won’t be leaving all your accounting to the last minute, for example, preparing for the tax year. Similarly, you’re much more likely to have an emergency fund when you’re in control of your finances, just in case that rainy day does come.

Relevant Reading for Money Mistakes That Will Sink Your Small Business: