Yesterday, we began to study some of the costly mistakes entrepreneurs make in business. Hopefully, you won’t make any costly business mistake again as we conclude today.
Have you ever made a business mistake that you regretted for a long time? As I wrote yesterday, I have made many business mistakes. But the 7 we are studying in this 2 part series are the ones I consider very important. The list is below.
- Going into a business partnership without an agreement
- Starting with only a mental plan
- Starting business without a cashflow projection
- Little or no effort to drive down expense
- Borrowing to start a business
- Running a business out of your wallet
- Ignoring Documentation
If you have not studied the first part, kindly do so by clicking here. Read it before reading this. We have studied business mistakes #1 and #2 already. So, we will dive into this from #3.
Business Mistake #3: Starting a business without a cashflow projection
This is so important. It is dangerous to start a business without a cashflow projection of at least 12 months. Otherwise, you are walking into that business like a blind person. Don’t do that to yourself. I have already done a full post on this before. Click the link below to read the complete report I did on Cashflow Projections.
ALSO READ: Cashflow Projection: How One Can Save You
Business Mistake #4: Little or no effort to drive down expense
As an entrepreneur, you will agree with me that we can be so obsessed with chasing and increasing revenue that we can sometimes forget that expenses must be kept down for the business to show the kind of profitability prospects that will attract investors. Keeping expenses low is also as important as increasing revenue. Don’t make this mistake because you need to ensure that your balance sheet looks really good.
Business Mistake #5: Borrowing Money to Start a Business
Only an entrepreneur who has much experience should do this. And no matter how experienced you are do not borrow money to fund a project/business that is new to you. Many years ago, I borrowed money from a couple of people to fund a business. The business did not work. I had to pay every cent! I paid that debt for over 5 years. In that whole time , I received threat messages from creditors. That distabilized me for years. If it is not equity contribution, don’t take it.
Business Mistake #6: Running a business out of your wallet
It is okay to run a business with your salary, personal money, inheritance, etc. It is not okay for returns to go back to your bank account and be available for salaries, food, diapers, computers, stationaries, house rent, cigarettes, printers, breakfast, lunch and dinner, and so on. In this way, it will be difficult to differentiate what belongs to the business from what belongs to you. This is one of the reasons many businesses die early. You have to separate the business from your life. Giving a loan to the business and systematically having it pay back is better.
Business Mistake #7: Ignoring Documentation
If it is not written down, you CANNOT understand trend and develop a process that is almost natural. Every single detail about transactions and business interactions must be well documented. Do not believe your memory will retain every information. Write it all down. For example, on the journal you keep a list of your customers, their names and contact information is not enough. Each person’s mood and mannerisms whenever they patronize you should be documented. It will help you and others who work for you to understand them better.
There’s more! But I need you to begin to “right” these mistakes in your business immediately. Do not hesitate to share this with your friends. Also leave a comment below.
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