Budgeting can be a challenge for any small business owner. Knowing when to spend and when to save can be crucial to surviving those early years. Yet small businesses consistently make a few of the same mistakes—mistakes that inevitably force them to either restructure or close for good.
Here are a few of the most common budgeting mistakes small businesses make…along with tips that can help you avoid them.
Mistake #1: Lack of Strategy
The day a small business first opens its doors, a solid business plan should be in place. Many small business owners, eager to get started, jump in without having a good, detailed business plan. Several resources are available to help set both short- and long-term financial goals for your startup. Ask advice from an experienced entrepreneur or a seasoned business analyst who can possibly spot a few things you might have missed.
Once a business plan is in place, it’s important to continue to review that plan regularly. Another common small business mistake is losing sight of that overall mission over time, leading to costly mistakes.
Mistake #2: Underpricing
When a competitor comes to town, undercutting everyone’s prices to land a job, it’s tempting for other businesses to reduce prices to compete. The competitor likely has a lower operating cost, often at the cost of quality. If you shrink your prices to compete, you’ll either have to operate at a loss or reduce the value of the product or service you’re providing to avoid losing money. Either of these choices can spell death to a growing business.
Instead of slashing prices to compete, emphasize to your customers that your product has a value above and beyond that offered by competitors. Let customers know exactly what they’ll get when they choose your business over others. This enthusiasm for your own value will be contagious.
Mistake #3: Overspending
Part of growing a small business is increasing capital. It’s important to keep operating expenses as low as possible in those early days to survive the inevitable obstacles that will occasionally come your way. Some small business owners choose to accept very little salary in the first couple of years, knowing it’s important to put every dollar possible into the business. While this isn’t always an option, it’s important to avoid the high life until it’s clear the business is realizing a steady profit.
Mistake #4: Disorganization
Life gets busy for small business owners. It’s easy to let expense tracking and billing fall through the cracks. Whether your business is a one-man operation or you manage a team of five to ten workers, software solutions can do some of the work for you, ensuring you account for every dime that flows through your accounts. Visa Business offers many great resources and tools for small business owners, like giving you access to your financial information from any device with an Internet connection. Built-in reporting and analysis tools help Visa Business Card owners determine where every dime is going to make better financial decisions.
In addition to helping with organization, Visa Business also provides discounts on certain purchases made through the Visa SavingsEdge® program. To learn more about the many benefits that Visa Business offers including features like lost or stolen card reporting and multiple layers of security, visit http://visa.com/business/.
I am blogging on behalf of Visa Business and received compensation for my time from Visa for sharing my views in this post, but the views expressed here are solely mine, not Visa’s. Visit http://facebook.com/visasmallbiz to take a look at the reinvented Facebook Page: Well Sourced by Visa Business. The Page serves as a space where small business owners can access educational resources, read success stories from other business owners, engage with peers, and find tips to help businesses run more efficiently. Every month, the Page will introduce a new theme that will focus on a topic important to a small business owner’s success. For additional tips and advice, and information about Visa’s small business solutions, follow @VisaSmallBiz and visit http://visa.com/business.