Avoid The Most Common Small Business Money Mistakes

April 28th, 2017 | by James B
Avoid The Most Common Small Business Money Mistakes

Running a small business presents a whole slew of challenges, especially if you are not being careful. Some of those challenges will have to do with managing your people, doing your marketing the right way and encouraging innovation in your company. And while making mistakes while solving these challenges can be detrimental to your company, nothing is as dangerous as making money mistakes. Today, we will be examining the direst mistakes you can make with your SMB assets and how to avoid them.

Bad Financing

In order to start a small business or expand it, you will need a large amount of money. What this means is that you will need to find a way to finance your new (or growing) enterprise and there are a few ways in which you can do this.

For many SMB owners, the first choice is going to a bank. Banks are supposed to be these stable organizations that will not charge you insane interest rates. As it turns out, the vast majority of bank small business loans are really bad for the party that takes them out and you are better off with a company that specializes in SMB loans, such as OnDeck.

Alternatively, you can check out some alternative financing methods, which are often a better solution than bank loans. You can also ask your friends and family to invest in your business, for which they would be given stock options should your company be listed on the stock market one day.

The important thing is that you do not rush into any loans or other financing options without thinking long and hard about what will happen in the future.

Wasting money on bad marketing

There used to be a time when marketing was much more straightforward. You would pay an ad agency and they would run your advertisements in the media that you could afford. You would also do some local guerilla marketing (although it wasn’t called that), you would give out some merchandise and you would work the trade shows.

With the advent of the internet, marketing has become far more complex and the worst thing about it is that companies often sink their money into practices that will not work for them.

Simply put, the world of digital marketing is so young that it is very difficult to say exactly what works – something that works for one company will not work for another and vice versa.

Also, some people just do not know how to read the metrics and the results and it all ends up in sticking too long with practices and techniques that do not work.

It is crucial that you pay attention to the money you are spending on marketing and that you are only doing the stuff that has been proven to work. Be smart about your KPIs and your return on investment. Also, do not be afraid to adjust your marketing efforts if things are not working out.

Making wrong hires

It is not that often that something HR-related is seen as a major money blunder, but hiring people who are wrong for your company is definitely a massive mistake that soon makes its imprint on the bottom line.

In order to understand why wrong hires are a money mistake, we need to compare the career path of the right against the wrong hire.

When you hire the right person for the job, the onboarding process goes smoothly and before you know it, they are contributing to your company. Moreover, they are engaged and they are coming up with ways to improve the day-to-day functioning of your company. They are making you money and finding ways to make you more money.

A wrong hire will take months before they are even close to being productive and even once they settle in, they will do their job just enough that you do not fire them. When they come across a new offer, they will bolt immediately and you will have to hire another person, train them and repeat the whole thing.

A wrong hire will put a huge dent in your budget, do not doubt that for a second.

Establish a structured hiring process where you will be extremely careful and only hire when you are 100% certain these people are right for you.

You can afford only so many money mistakes before things get really, really dangerous for your company. Avoid them as much as you can.

We just hope this article helps.