It would be physically impossible to list all the mistakes a person or business could make regarding money. It is however very useful to know the best practices regarding finance, as well as the common pitfalls to avoid. Some things we are destined to learn the hard way, but let us hope that our knowledge and understanding will guide us in our adventures. Make no mistake, entrepreneurship is an adventure that requires courage and the willingness to move into the great unknown with certain nonchalance. One way we maintain that nonchalance is through acquisition of knowledge and skill with regard to business and finance.
Here are 5 Common Financial Mistakes Made by Entrepreneurs
1. Failure to Plan Wisely
Financial planning requires some work. The basic theory is that your money invested should net a return of maximal value either in the short or long-term. There is also the element of risk, so you must decide how much you are willing to risk and how much you aren’t. All of this takes some homework. Even when you get every decimal right, you can come out uneven in the end and have to really scramble and hustle to make it through.
Some of the things that entrepreneurs tend to miss are taxes, insurance, legal requirements, and various fees. Failing to set aside percentages for taxes can put you in a predicament you absolutely don’t want to be in. As soon as your revenue gets into a fairly high level, hire an accountant and an attorney and ensure you are continuously covering all your bases. Failure to collect money that is owed is another thing that can make a struggling business struggle even more.
2. Failure to Deliver
The most devastatingly fatal mistake you can make is to fail to deliver. That is because people are paying you to deliver something, perform a service, etc. Delivering half of the service, delivering it later than was promised with no explanation, delivering with sloppy or unfriendly service, all equate to NOT delivering. To DELIVER means providing what is promised or something better, and doing so in a professional, prompt, and friendly manner. Both quality and speed are vital. Shutting your doors or not answering the door or the phone means you don’t exist and you will be promptly forgotten. Your reputation is always on the line. Quality control is another essential in your financial equation. You exist to deliver something and this affects your finances more directly than anything else.
3. Lack of Marketing Expertise
Your image, what you present to the public, and how you are perceived are all vital to your bottom line. So is understanding WHO your public is and what they need and want. One tool that many entrepreneurs overlook is the SURVEY and the information it can yield. You can do surveys on anything. It doesn’t even have to be a formal survey. Asking around about something is a form of survey. When you have collected reliable market data, do you execute a marketing plan and do you monitor its results? When something isn’t working, do you fix it or cancel it or are you confident it will work in the long-term? These are pertinent questions.
Right along with marketing is how you handle the names and leads you acquire. When someone calls in, how is the call handled? When people email through your website or attempt to contact you through social media, do you answer promptly? Many businesses lose TONS of money because no one answers the phone or the emails, or someone mishandles them.
4. Lack of Sales; Failure to Close
There is a particularly brutal speech at the beginning of a 1992 film called Glengarry Glen Ross. Alec Baldwin plays a sales trainer of some kind who comes “from Downtown” to convince a group of real estate salesmen that they had better close or “hit the bricks” (get a new job). The speech has become known as “Coffee’s for Closers” and is packed with wit and profanity, and while I wouldn’t endorse its attitude toward salesmen or any employee, it does contain some valuable lessons. You see, in sales, it literally is close or get another job, not because of any maliciousness but because you just don’t make any money if you don’t close.
What “sales” really boils down to is communication – how to converse with different types of people and being receptive to what they need and want. Sales (the profession, the activity) is an art and a skill that does not apply only to customers. You must use the skill in dealing with vendors, creditors, bankers, and virtually anyone at some point or another. Another “secret” is that your sales goldmine is made up of your leads and your files, as well as your sales force.
5. Personnel Mistakes
Hiring the wrong person can trip you up. Being able to hire for maximum productivity is yet another vital skill. You can learn from mistakes, but this is not necessarily the best method. I have, in fact, written several posts on the subject of hiring which should be useful. But it isn’t just who you hire. Team building, providing sound policy, rewards and bonuses, employee honesty, mediating disputes – these and many other HR-related matters can generate financial problems if you fail to predict and remedy the situation in an efficient and timely manner.
A failure to delegate is a common mistake. Hire people you can trust and give them responsibility and thus, free yourself up to plan for the future of your company. You can and should manage your day-to-day affairs, but as you grow you must be able to delegate. You as the entrepreneur are often the one called upon to provide vision and bring your project to the next level.