Updated: May 9
For a lot of creatives, effective financial management is one great area of concern and this is especially true for new or growing businesses. However, the success of a business is heavily dependent on how well it manages income generation, expenditure, etc.
Passionate about the growth of your business? Here are some money mistakes you want to avoid in your business.
As long as you have a great product and employ the right marketing strategies, your customers will find you.
Mixing Business & Personal Finances
This is one of the biggest mistakes anyone can make with their business. Your business should be treated as a separate entity from you, so important elements of the business such as finance should be taken seriously and handled separately from your person. As soon as you legally establish your business, open a bank account where all income and expenditure that are strictly for the business go in and out of. This way, you're able to keep track of your business expenses.
Having no budget for your business means you have no projections for your business' finances and that is growth inhibiting.
A budget allows you to estimate your income, expenditures and helps you to make informed business decisions. It is recommended that on a monthly basis at least, list all estimated income, recurrent and non-recurrent business expenditure, keep them conservative and try to keep within the projected expenditure.
Keeping track of all income, expenses and stock inventory is how a business is able to grow. Take note of everything! Even if you're unable to hire a professional at the start of your business, use simple tools such as notebooks and apps to record every income, expenses, incoming and outgoing stock. This way, you're able to tell when to restock, in what volume as well as when to expand your business.
Spending More Than Your Business Makes
There's no faster way to kill a business than incur more expenses than its income. While doing all you can to increase your business income, do your utmost best to keep business expenditures conservative. Make wise choices, do not spend money on things that the business does not immediately need or won't contribute to income generation. Choose functionality over aesthetics or luxury.
Underpricing Your Products/Services
This is one mistake that is very common to new business owners especially. Sometimes, in a bid to attract and grow a customer base, business owners set prices for their products or services at low prices. This greatly affects business growth as you may struggle to break even. Never sacrifice the worth of your products or services to build your customer base. Instead, ensure that you factor in all costs incurred in production as well as value for your creative time then set a reasonable price. As long as you have a great product and employ the right marketing strategies, your customers will find you.
In summary, avoiding these mistakes and employing better financial management efforts will better position your creative business for success.