If you have started a business and hope to never make mistakes, it’s quite an impossible feat. Besides, sometimes making mistakes is important, because it gives you a reality check and an opportunity to learn. Extraordinary growth and impeccable learning have always been a byproduct of terrible mistakes. So, they aren’t as bad as they might seem.
However, this doesn’t mean you just keep on making mistakes, expecting you will learn. Sometimes, it can cost you money, or even worse, your dream, your business.
The idea is to learn from other people’s mistakes. Below, we have rounded up a list of such mistakes people have made in their past to keep you aware and informed.
1. Insufficient Working Capital or Cash Flow
Stats reveal that 82% of startups fail because of poor cash flow management which is usually due to the shortage of working capital. Every business requires a healthy flow of working capital for meeting the operational expenses or production costs. You might have generated 6-figure sales on paper, but since they are on credit, it makes no good to your working capital.
But of course, you can’t stop selling your goods and services on credit. So instead, make your estimation correct. Don’t overestimate how quickly you can recover your working capital and never underestimate all the expenses you would have to incur in the present as well as the future.
Estimation is the key. The better you estimate your cash requirements, the better and accurate your plans for the future would be.
1. Failing to Plan your Budget
“Failing to Plan, is Planning to fail.” We all know how planning is the key to every successful business. This means, if your approach fails to foresee the expected expenses and revenue, and has just blindfolded jumped to test the wave, it is bound to get stuck into a vicious loop of debt trap or worse, fail.
I know it’s impossible to plan for the year to come because there are so many things that can change in the meantime. So instead, budget for at least the next one month or the next quarter.
In any case, there will be factors that will emerge without warning that cannot be ignored. But a rough sketch before diving deep will keep you prepared for the future, you will have a fair idea about what to expect. Besides, you will also learn so much from the sudden change in plans.
2. Seeking Credit at worst times
People from all over the world explore so many bright ideas every day and still fail. Why? Because the creative mind failed to get the funding for his idea which is primarily because they waited for too long.
Funding isn’t something you will get as soon as you make your first pitch. Infact, even the most successful businesses have been rejected multiple times before they took off for the final fight.
So, make sure you have sufficient time in hand while seeking for credit. Don’t consider it as a recuse from the crisis but as a cheerleader through it all. The type of credit will also depend on the kind of funds you are seeking, the type of business you run, or even the application of sourced funds.
There’s a high chance that local banks will turn you down but don’t get disheartened and instead reach out to online lenders and check their terms and conditions. Before closing the deal, make sure you have researched all your sources, their interest rates, and other repayment conditions.ṣ
3. Overspending
You are bound to be optimistic when you see the business working and the revenue coming in but this optimism, if not checked, can soon lead you to overspending.
You get more driven towards satisfying the customers and underestimate the expenses incurred for it or stock a hefty inventory which ultimately adds a lot to your startup costs.
You definitely don’t want to lose all that you have earned. So, instead, budget your startup on real facts, not instincts.This will save your business from the unknown debts that may lead you to a failure. Make good contacts with the debt collection agency of your area be it Singapore, NewYork or any international company so that you have a helping hand by your side in case you need to handle some non-paying clients.
Healthy optimism isn’t bad, it keeps you motivated but make sure you don’t push it beyond the boundary.
In conclusion,
Remember, mistakes are inevitable. So, don’t be afraid. Even the entrepreneurs topping the charts in the present day have made blunders in the past. But what set them apart is the never-give-up attitude and the determination to succeed. Keep up with that and you will soon reach where you have aspired to be.