Mistakes are common, even in business. However, it doesn’t mean they cannot be avoided. All business owners have faced all those critical moments when it comes managing their startup money to ensure that their new business will last. Here are the financial mistakes for startups the entrepreneurs should avoid to manage your initial funds.
- Diminishing the Value of Human Capital
Being a founder, you are not only the CEO of your startup company. Rather, you are also the salesperson, the receptionist, the secretary, the janitor… and the list keeps going on. Well, do you know that taking on all those tasks of managing a company is also one of the big financial mistakes for startups?
Human capital is the reason. Rather than trying to do everything, respect human capital and give it the most power. Consider delegation as a form of investment instead of an expense—an investment to enable you to spend more of your time into the core pursuit of your business. Understand human capital by trying quantifying the financial value of your own time.
- Being “All-In”
Many entrepreneurs tend to focus on growth with the long-range mindset in their head. Even so, apparently this thinking can be the worst financial mistake for your company. As you start making money from your startup business, it’s easy to wish to invest all the money back. But this won’t be worth it if you cannot write a check and protect your business’ cash flow.
Just a little reserve sometimes can go a long way, providing you more peace of mind. Build a short-term cash reserve separated from the money you spare for company operation. Reinvest in the operation, for sure, but be sure to save a little too.
- Ignoring the Importance of a Financial Mentor
Though it’s widely known, apparently not all new entrepreneurs have a mentor to talk about the challenges of running a startup company and to help them make decisions.
A mentor in organizing the money is also important to serve as an advisor. Don’t fall into the trap, thinking that you’ll have to have money to work with one. In fact, financial firms work with clients of various stages, even the startup one. Alternatively, a colleague, accountant friend or family friend will do as well.