Many businesses start up, but very few of them succeed over time. In today's post, we are sharing three mistakes that start ups make, so you can avoid them. We're also providing a special bookkeeping package for new businesses to help grow your business the correct way from the beginning.
Mistake 1: Setting up your business as the wrong entity type
When you create your business, you have to register it with your home state and choose your business entity type. Most entrepreneurs have no idea what type of business entity they should be and end up taking advice from friends or family. By choosing the wrong entity type you can open yourself up to lawsuits that can affect your personal assets, and you could be subject to higher income taxes. We wrote a post a few weeks ago with a simple explanation of business types that includes a great flow chart so you can choose the correct business entity for your new business.
Mistake 2: Not having a budget
People always cringe at the word budget. Why? Well, first I think it is because it seems daunting to try to capture all the "numbers" for your new business in one place. Perhaps you are having a hard time estimating expenses or you don't know what your revenues will be. The best thing I can tell you is do some research, and just start! You need a budget in place to ensure you are not over spending in the early stages of the business. You can also use your budget to track your financial goals and ensure you are meeting your projected revenues. Having even the most basic budget in place makes you accountable for reviewing your numbers regularly. The knowledge gained from understanding the differences in your budget and what really occurred is invaluable in making educated financial decisions as you grow.
Mistake 3: Avoiding the bookkeeping for your new business
A lot of new businesses have no idea how to handle the bookkeeping for their business. You may try to track things in an Excel spreadsheet or keep receipts in a box, but you aren't really tracking and analyzing the finances for your business. By avoiding the bookkeeping for your business, you can't make educated decisions for your business. You won't succeed if you are making decisions based on assumptions. Tracking your revenue, expenses and reconciling your bank accounts are the number one way to ensure you are going to succeed.
Over the years, we have realized that start ups need bookkeeping, financial reporting and advising services, but don't always have the budget to pay for professional help. To support our fellow small business owners, we have created The Ultimate Bookkeeping Package for New Businesses. With this package, you can get bookkeeping services, reports and an advising call for only $49 per month*. More details can be found here. We're only providing a limited number of these packages to new clients, so please contact us if you are interested.