6 Mistakes to Avoid When You’re Financing Your Small Business
6 Mistakes to Avoid When You’re Financing Your Small Business
Your business is your baby and you want the best for it. When it comes to financing your small business, these 6 common mistakes might not seem like a big deal at first but they have an impact. They can cost you time and money or even worse, they could cost you everything.
Don’t let these small mistakes get in the way of your success! Learn how to avoid them by reading this blog post on 6 mistakes to avoid when financing your small business so that you can make the right decisions for yourself and your company.
6 Mistakes to Avoid When You’re Financing Your Small Business
Mistake #1: Failing to get a business plan
A business plan is a living document and it’s an important part of the financing process. It is meant to be a roadmap for your business. It provides you with valuable information like what your goals are, what your risks are and what you might need in order to meet those goals. Without one, you won’t know where you’re headed or how to get there.
Mistake #2: Failing to do adequate research
Research, research, research! This is one of the most important steps in financing your small business. You need to dig deep and find out what’s out there for you to help make the best decision. Check with your bank about what type of loan you qualify for or the different types of loans available to you.
Mistake #3: Not planning for the future
There are so many ways to finance your business. There are traditional loans from banks, as well as crowdfunding platforms like Kickstarter or Indiegogo.
But, if you don’t plan for the future, those other options might not be available to you when you need them the most. You need to plan ahead of time if you want to make sure that there are always financing options available for your business. You can do this by saving up money throughout the year or making sure that your credit score is in good shape.
The more options and flexibility you have, the better off you’ll be! For example, a bank might offer a loan with a low interest rate but require a 20-year repayment term. This would be great if your company is stable and won’t need any new funding in the next 20 years! But what happens if your company needs a huge investment in 10 years? In that case, it might not be the best option and might limit your opportunities down the road.
Planning ahead is crucial no matter which route you go with financing your small business!
Mistake #4: Not understanding your cash flow
When you own a business, there are two different kinds of cash flow:
– Cash flow from operations: The cash leftover after expenses for the day
– Cash flow from investing: The cash leftover after expenses to make an investment
You have to understand which of these two types of cash flows your business is dealing with. This will help you get a more accurate idea of how much money your business has available to be used. If you try and spend all of the money in your company’s bank account, but then it turns out that you were spending from your investment account, then you might end up paying too much in interest because the money isn’t there when it’s time to pay back the loan. That’s why it’s important to understand what type of cash flow you’re dealing with and which one’s left over before deciding where to spend your money in pursuit of growth.
Mistake #5: Failing to do inventory or any record keeping
Many small business owners succeed because they have a strong inventory management system. This requires regular inventories and bookkeeping to keep track of your revenue, expenses, and other important factors in order to make the right decisions for your company.
Failing to do inventory or any record keeping can cost you time and money. When you don’t know where you stand, it’s hard to make the best decision for your company. Keeping track of your inventory also helps you make better decisions about what to stock for your customers – when you know what sells, it becomes easier to buy more of the things that sell well.
How does not doing inventory affect your small business?
Inventory is an important part of a business. It can help you predict what items need to be ordered and how much money you will have coming in. If you don’t do an inventory, you may end up ordering too much or not enough, which isn’t good for your business. You might also find out that some products are not selling well and then have to cut back on those items.