Avoid These Small Business Owner Mistakes

These events are common among business owners. But that does not mean they are unavoidable. With enough strategy and skill, business owners could actually avoid them so you won’t have to pack your open sign after only getting it for a few months.

Image Credit: www.marketingprofs.com

Listed below are mistakes small business owners make that could ruin their ventures.

The first of the three mistakes you see small business owners make is their underestimation of their funding requirements. Without proper initial funding, businesses usually resort to borrowing money until they drown on piles upon piles of debt. The right amount of funds and where they can be sourced should be among the first factors small business owners should look into even before they embark on their business. Otherwise, they would not have the impetus to continue their business, and they eventually fold.

There are various sources of funding for small businesses, and they should look into these options as a priority. The eventual selection of the method they use depends on several factors, including how comfortable they are about debt, how solvent the owners are, and of course, the amount they need to start the business ‘rolling.’ Small business owners should account all of these, even including the cost of your open and LED sign so that they can accurately estimate how much funds they need to establish their venture. But this is an important point: these business owners need to be wise in the selection. They need to pick the right funding method that would be easy for them to repay once they’ve earned sufficient, not bury them in debt.

Another of these mistakes is not having the foresight to address future developments. Future financial planning is not only restricted to future financial emergencies the business may encounter. The overall economy may experience a downturn, increased competition may happen, and investors may pull out, which can drain funding for the business. In connection to the earlier point, the small business owner should anticipate funding for these events so that even when they happen, the business will not be entirely affected.

The last of these mistakes is not letting the business have its own credit rating. This may be caused by the business owner using his or her own personal funds to bankroll the operation. Other business owners see the instruments that build a credit rating such as loans and credit lines as risky, so they do not bother with them and instead prefer to get funding by cash or investors. However, it is inevitable in business to eventually get a loan. Without a credit rating, lenders would not be able to decide on whether a business is worthy of extending credit to. Building a credit rating should not be too risky as long as the business owner knows how to select a lender that extends manageable risk.