Money Making Mistakes to Avoid for Entrepreneurs
During the peak of the American recession almost 1 in 10 jobless individuals launched their own companies. The do-it-yourself mindset is a growing trend among not only the young, but older demographic. For those grinding away or thinking of making the leap, here are 6 ways MyBankTracker has stayed on the path to making money.
As a small business owner, one of the biggest decisions you can make is understanding how you are actually going to make money. To ensure you capitalize on your money-making product or service, you will need a grasp on things such as pricing, cost control or financial management. Keeping this top-of-mind will help you create a flourishing company and not one that lives invoice to invoice.
Money vs. Mission: While money helps the business grow, it is important to always stay focused on your mission. If you stay focused on what you love (the reason you started the business) you will build a business people love.
Have a Strong Pricing Strategy: When the time comes to start charging for your services, having a strong pricing strategy can be the difference between sink or swim. Price too high and no one will buy; price too low and you end up losing out on revenue. If you are in a business with comparable competitors, your pricing strategy will be easier to determine. For those in a market that is not as transparent, do what you can to find out what others are charging, but plan to start high with expectations of lowering. By starting high you can avoid cutting into your profits.
If possible, avoid being the lowest price. Don’t undersell, this can devalue your product and not only turn consumers off, but also force you to generate so much volume it could put you out of business.
Know your Real Costs: Just because the product or service you are charging costs less than what you charge, does not mean you are making money. It is important to consider every aspect of your business from payroll to the water bill. Knowing what your costs are for every variable in running your business will help you accurately project if you are making money or not.
Ignoring Taxes: Having a ton of cash, wont mean much come tax season if you haven’t been making the necessary tax deductions. Along with watching your day-to-day expenses, cash flow and product cycle, it is important to plan for your taxes so when it comes time to pay the IRS you are prepared. Examples of taxes that you should be considering are sales tax, income tax and payroll tax to name a few.
Cash is Most Important: A common mistake small businesses make, is combining cash and profit together. Many companies can be profitable, but if they lack the cash to cover internal costs, they wont be in business for long. During the recession a number of companies had strong profits, but when clients started disappearing they lacked the cash reserves to stay afloat during slow times. Know what your cash flow is; if it is not growing each month you possibly aren’t making a sustainable profit.
Read more about the Top 6 Most Influential Entrepreneurs to see how some big names got their start. Check out this video of Jerry Kaplan explaining common mistakes of entrepreneurs.