5 Mistakes Small Business Owners Often Make

Don’t overlook these five common mistakes that most small business owners make when starting their first business. Use these guidelines to help grow your company into a successful business superpower.1. Unreasonable ExpectationsThere’s nothing wrong with small business owners setting challenging goals or having high expectations for their new company. In fact, a majority of entrepreneurs are born with these exact personality traits. Owning a small business and watching it grow from the ground up is definitely something worth getting excited about. This type of excitement is often a good thing to have, but sometimes too much of a good thing can result in bad situations. As a new business owner, be cautious not to let the rush of starting your own business get to your head. Oftentimes small business owners think their businesses will generate revenue much faster than is realistically possible. While in some cases this does actually happen, the reality is that the majority of small businesses take some time to grow. Think of your business as a delicate plant that takes some time and proper nourishment to flourish. There’s no need to try to rush the process or have unreasonable expectations of overnight riches. The successful business owners stay calm and collected because they know that watering their “plant” too much isn’t going to make it grow any faster and in some cases might even kill it. Take some time to plan and think about your small business and set realistic goals before you get started. In most cases, this is all it takes to turn your green thumb for business into lots of green cash.2. Mixing Personal and Business Bank AccountsIt’s always a good idea to keep your personal bank account separate from your business bank account. Small business checking accounts are fairly inexpensive and offer a variety of benefits for your business. Some popular banks even offer free business checking if you maintain a certain balance or make a certain number of transactions every month.Having a dedicated bank account devoted entirely to your small business makes it much easier for you to keep track of incoming payments and outgoing expenses. Separating the two accounts also makes it less likely for you to overdraft or underestimate your income and expenses which could result in additional banking fees. At first, it may not seem like you need a business bank account because you’re not making or receiving a large number of payments but in the long run the total number of transactions your business makes each month will grow alongside your business. You’re eventually going to need a business bank account that can handle a lot of activity so it’s best to do it up front to keep all of your expenses and payments tied to a single account. You don’t want to wait until you’re processing hundreds of transactions a month and then have to transfer all of your automatic debit card payments and revenues to another account.Another benefit that a separate bank account offers is the automatic organization of all of your transactions. Most banks provide electronic statements that list all of your transactions made with your account every month. These statements are very helpful in preparing your financial statements at the end of the business year. Organized records will help you avoid paying extra taxes and help you take advantage of business tax deductions.3. Failure to Budget ProperlyThis is one of the most common mistakes new business owners make. Despite the simplicity of keeping a simple budget, most business owners refuse to keep track of their business’ revenues and expenses. Take some time to write out a list of all your expenses and sources of income. Keep track of all your fixed expenses (fixed expenses are expenses that are the same every month, for example your rent) and your variable expenses (variable expenses are expenses that change with the amount of usage or output, for example your electricity bill). Compare these expenses with your income sources to see if you’re turning a profit every month. Writing these numbers out on paper will help you visualize how much money is entering and leaving your business every month. Keeping a proper budget is a continuous activity. Your expenses and income are constantly changing so it’s recommended you evaluate your budget at least once or twice a month. As mentioned in the previous paragraph, setting up a business bank account makes budgeting much easier than keeping track of everything manually. Often business bank accounts come with free services that help with budgeting and keeping track of your business records.4. Overlooking Government Tax BenefitsIf there were a hundred-dollar bill laying on the ground would you pick it up? Most people would. Free money is hard to come by these days but there’s plenty of it available for people who own their own business. Small business owners often don’t take advantage of the many tax deductions the government offers to all businesses. Tax deductible items include office supplies, furniture, office equipment, software for your business, any subscriptions you might have related to your business and even the space in your house that’s dedicated to your business if you work from home. Even some of the gas you use for your car is deductible if you’re using it to travel for business purposes. These are just a few of the things that are eligible for tax deductions and can decrease your taxable income on your federal income tax form. Current information on available deductions and how to take advantage of tax-deductible expenses can be found at the U.S. Small Business Administration website.5. Marketing MistakesThe key to generating revenue and profit is having a strong, effective marketing strategy. If you don’t devote some time to developing a marketing strategy for your small business then odds are you’re missing out on a lot of potential profit, if not ALL of your profit. Don’t make your business suffer by avoiding or skimping on marketing costs. The reality is marketing services aren’t always cheap. Before you spend a pretty penny on your business marketing services, make sure the services you’re buying will be an effective way to market your service or product. For instance, don’t advertise your video game review website in the newspaper…odds are your target demographic for that type of business doesn’t even read the newspaper.There are many different ways to market your business. Marketing methods range from the traditional business card, to paying for search engine marketing, to hiring a professional marketing firm. Do some research on the marketing methods that work the best for your line of business. If you’re short on ideas, look at how other successful businesses and competitors in the same industry are marketing their products or services. Keep track of how well various marketing methods work for your small business. Continue to use the methods that work well and cut out the methods that don’t work so well. Remember, marketing is a dynamic process that takes time to develop and become effective. Odds are you will make a few mistakes throughout your marketing process, but that’s okay. The biggest mistake you can make is not marketing at all, and you will far beyond that now.

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