Common Financial Mistakes Small Businesses Make and How to Avoid Them

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StrategyDriven Managing Your Finances Article | Common Financial Mistakes Small Businesses Make and How to Avoid Them

Finance is at the very heart of every business! Understanding and managing figures pertaining to your business helps to improve the survival rate of your business. Irrespective of the size of your business, correct management of your expenses can pave the way for the smooth functioning of your business.

More often than not, small business owners often fall prey to financial mistakes. No doubt, to err is human, but several small businesses cannot afford to make such mistakes. On the brighter side, many of these mistakes can be easily avoided if paid close attention to. In this article, we’ll dive deep into the most common mistakes small businesses make and how one can avoid them successfully. Read on to find out more!

1. Venturing in Without a Clear Plan

Starting a business without a clear plan for your finances is like walking blindfolded. You may never know when you will falter and fall. Hence, it is highly advisable to develop a business plan that maps out your business finances, the business model and the nitty gritty involved in its implementation.

No doubt creating a business plan is an arduous task which involves time, money and effort. But it sure puts you in a better spot with regard to your future expenses by bringing clarity along the road. It is also a great way to formulate realistic financial projections and set a stipulated budget aside for the coming year. Needless to say, this entire process can help you avoid bankruptcy.

If you are just starting out with your business and looking for professional help, then you must reach out to commercial financial consultants who are highly experienced in this field.  Financial consultants are a one-stop solution for all your financial concerns – be it tackling operational challenges or looking for investment opportunities for your business. These finance experts can help you stay ahead of the game and beat the competition too!

2. Repurposing Previous Budget Plans

A common tendency for many small businesses is to repurpose the previous year’s budget plan for the years ahead. While this process might seem time-saving, it can in fact jeopardise business operations in the long run.

For instance, your business may now be operating in a different financial climate as opposed to the previous year. It can also be hampered by market conditions, pandemics, recessions or even natural calamities. These influences can have a solid impact on the working of your business as consumer spending habits change, and the cost of commodities increases or decreases depending on market conditions.

It is completely understandable to use the previous year’s plan as a benchmark for comparison. However, it is extremely vital to tweak it while keeping the current business circumstances in mind when creating a new budget for the year.

3. Opting for Personal Debts

Businesses often work in a volatile and unpredictable market. These conditions often lead to setbacks for your company, especially in the beginning stages of your business. Moreover, these setbacks can lead to financial repercussions, making it difficult for you to carry on.

More often than not, business owners consider personal finances and savings to fund their daily operations, work on business expansion or recover from setbacks. Hence, an alternative solution is to discover cost-effective low-credit loans.

These emergency loans are quick in nature and tailored specifically for individuals who are on a low credit score. This process ensures you do not need to dig into your personal finances and still manage to stay afloat through verified and genuine sources of finance.

4. Spending Far Too Much Unnecessarily

It is really tempting to get your hands on the best technology that can streamline your business or perhaps heavily invest in marketing activities that can help you reach a wider audience.

It could be a swanky office space that you want to invest in for your business or hiring highly experienced employees. Certainly, the key here is the prosperity of your business as these factors can provide the much-needed push for your business. But maybe being frugal for the time being is a better alternative than going back to zero. Besides, it doesn’t make much sense to spend recklessly while you are still trying to boost profit.

It is imperative to formulate a realistic budget and stick to it for the time being. There are several things that a business can do away with at a nascent stage such as a posh office space or the latest technological gadgets. These little saving tips can certainly help your business function better in the coming years.

5. Failure to Set Up an Emergency Fund

In these uncertain times, one is likely to face unexpected expenses on the way. Emergency funds can be a great way to safeguard your business from these. To simplify, these are the type of savings that help in preventing debts during an unforeseen situation or crisis.

It is highly recommended to set up two types of emergency funds. One that specifically covers the business front and the other that helps with personal finances. Actively saving up can also help in running your business comfortably.

How do you know whether your savings are enough? For starters, consider whether you can comfortably run your business for the next 3-4 months without any flow of income. If yes, then you have enough savings to start with. Ensure to demarcate between your business account and personal account. More often than not, entrepreneurs add their personal expenses to the business account, which leads to difficulty in the management of cash flow.

6. Failure to Focus on Cash Flows

Small business owners often fail to pay attention to their cash flows and profit margins on a regular basis. Ignoring the expenses and revenue generated by your business may lead to many other problems. For example, avoiding the math will hamper your overall business operations in the long run.

Keeping a tab of your daily income and expenses can give you a fair idea of your progress and keep you on top of things. Moreover, this rough estimate can help you project your potential profit margins and be aware of cash flows in the business.

7. Underestimating the Power of Financial Tools

The days of managing business finances manually are long gone. Although this process has its own perks, it is open to several inaccuracies and mistakes. Not to mention it can be cumbersome and inconvenient for a business owner to manage on a daily basis.

There are several accounting software and tools that are inexpensive and can help ease the process of making informed financial decisions. Additionally, these tools offer accurate and reliable information from a single source, eliminating confusion and miscalculations.

8. Not Paying Enough Attention to Research and Marketing

While it’s fairly understandable that this might not be your first priority when starting a business, research and marketing can significantly help you boost business growth. Investing highly in marketing isn’t a requirement in your initial years of work. However, one must keep track of organic marketing methods as these can drive sales and ROI for your business.

Creating a solid content marketing strategy that is focused on your ideal audience is a better approach than running paid ads in the developing stage of working. This can boost brand awareness and brand visibility as you offer information and engaging content to your audience.

The flip side of this is that small business owners end up spending a huge cost of their savings marketing in the initial stages of work. At the very beginning, you might have to experiment with different marketing strategies and some of them might not even fare well, leading to a big hole in your pocket.

Hence, it’s best to gather a fair idea of the market and its working before you dive into investing heavily in marketing-related activities.

To Sum It Up

Starting a business from scratch can often be intimidating and arduous for any small business owner. However, being equipped with sound knowledge of the industry and the best practices to follow can help it stay afloat. While some setbacks are unavoidable, a conscious effort to learn from your mistakes is what makes an entrepreneur stand out from the crowd.

Common financial mistakes such as spending lavishly or not keeping a tab on your cash flows can deeply hamper the daily functioning of your business. It is imperative to reach out to professional financial consultants when stuck at any stage of working.

Remember to actively make decisions to save up and have an emergency fund as a backup. In case of emergencies, it is always a great idea to look for low-credit loans that are quick and accessible to all. Keeping these tricks in mind can help you minimise the risk associated with business and pave the way for a successful venture.

9 Essential Personal Finance Tips to Strengthen Your Financial Future

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StrategyDriven Managing Your Finances Article | 9 Essential Personal Finance Tips to Strengthen Your Financial Future

Managing personal finance can seem overwhelming, especially if you’re not sure where to start. But taking control of your finances is essential for a secure financial future and achieving your goals.

In today’s fast-paced world, it’s easy to get caught up in spending money on things we don’t need and often don’t have the money for. The good news is that by adopting a few simple financial habits, you can strengthen your financial future and enjoy the benefits of financial success.

Taking the time to manage your finances will help you take control of your spending habits and make smart financial decisions. Let’s discuss some tips to help you take control of your finances, avoid setbacks, and achieve financial success.

Create a Budget

Creating a budget is the foundation of good financial management. A clear understanding of your income and expenses will help you avoid overspending and ensure you have enough money to cover your expenses.

Start by tracking your expenses for a month and then categorize them. After you have a clear picture of your expenses, set up a budget considering your income and expenses. Make sure to stick to your budget, as this will help you stay on track and avoid overspending.

Know Your Income Sources

Knowing your income sources is important to manage your finances effectively. Your tax liability is generally calculated based on your overall income, so it’s crucial to understand all types of income and how the IRS classifies them. While most people are familiar with earned income, unearned income is less well-known but equally important.

Unearned income refers to income from other sources unrelated to employment, such as passive investments that earn you interest and dividends. Learn about unearned income and its tax implications to accurately report your income and avoid any issues with the IRS.

Knowing your income sources can also help you identify areas where you can increase your earnings. Take some time to evaluate your current sources of income and consider ways to diversify your income streams. This could involve pursuing additional education or training to advance your career, starting a side business, or investing in stocks, real estate, or other ventures.

Track Your Expenses

Once you have a clear idea of your income sources, tracking your expenses is important. Knowing how much you spend and what you spend on will help you make better financial decisions.

Create a budget and list all of your fixed expenses like rent or mortgage payments, utilities, car payments, insurance, and other bills. Then, track your variable expenses like groceries, entertainment, and dining out.

One easy way to track your expenses is to use a personal finance app like Mint, Personal Capital, or YNAB (You Need A Budget). These apps can link to your bank accounts and credit cards to automatically categorize your expenses and show you where your money is going.

Reduce Your Debt

Debt can be a major obstacle to achieving your financial goals. High-interest credit card debt, student loans, and car loans can eat up a large portion of your income, making it difficult to save for emergencies or invest for the future.

If you have high-interest debt, focus on paying it down as quickly as possible. Start by making a list of all of your debts, including the interest rate and minimum payment. Then, prioritize paying off the debt with the highest interest rate first while continuing to make minimum payments on your other debts. Once the highest-interest debt is paid off, move on to the next one and continue until all your debts are paid off.

If you’re struggling to make your debt payments, talk to a financial advisor or credit counselor. They can help you create a debt management plan and negotiate with your creditors to lower your interest rates or set up a repayment plan.

Save for Emergencies

No matter how well you plan, unexpected expenses can arise. A car repair, medical bill, or job loss can derail your financial plans if you’re not prepared. That’s why it’s essential to have an emergency fund.

Financial experts recommend having at least three to six months of living expenses saved in an emergency fund. This money should be easily accessible, but not so easy that you dip into it for non-emergencies.

Start by setting a goal for your emergency fund and then create a plan to reach that goal. Consider setting up automatic transfers from your checking account to a separate monthly savings account to build your emergency fund over time.

Invest for the Future

Investing for the future is essential for building long-term wealth. While there are risks involved in investing, it can provide higher returns than simply saving money in a bank account.

Start by setting a goal for your investments. Do you want to save for retirement, a down payment on a house, or a child’s education? Then, consider your risk tolerance and investment options.

If you’re uncomfortable choosing individual stocks or bonds, invest in a mutual or exchange-traded fund (ETF). These investment vehicles provide instant diversification and are managed by investment professionals. Do the research and choose funds with low fees and a solid track record.

Manage Your Credit Score

Your credit score is essential to your financial future, as it can impact your ability to get a loan or credit card. Start by checking your credit score regularly and addressing any errors or discrepancies. Make sure to pay bills on time and keep your credit utilization low.

Additionally, avoid opening too many new credit accounts at once, as this can negatively impact your credit score.

Live Below Your Means

Living below your means can help you achieve your financial goals and avoid debt. Identify areas where you can reduce expenses, such as eating out or entertainment. Prioritize needs over wants, and consider finding ways to save money on necessities, such as groceries or utilities.

Remember, living below your means does not mean sacrificing your quality of life but finding ways to make smart financial decisions.

Save for Retirement

Retirement may seem far away, but it’s never too early to start planning. The earlier you start saving for retirement, the more time your money has to grow.

Start by calculating how much you’ll need to retire comfortably. Consider your lifestyle, expenses, and any other sources of retirement income like Social Security or a pension.

Then, save as much as possible in tax-advantaged retirement accounts like a 401(k) or IRA. Take advantage of employer matching contributions and increase your contributions as your income grows.

Conclusion

Strengthen your financial future by keeping in mind these finance tips. Establishing a budget, paying off debts, constructing an emergency fund, and investing for the long run are only some of the many ways you can improve your finances. Don’t forget to systemically assess how well you’re doing financially and make any required changes along the way. With hard work and dedication, financial success is yours to take – giving yourself the opportunity to live life just as you’ve imagined it!

How to Raise Money as a Business

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StrategyDriven Managing Your Finances Article | How to Raise Money as a Business

Raising money is an important part of building and growing a successful business. Whether you need to raise money to fund a new startup or to expand an existing business, financing can be a complex process. With so many options available, it can be difficult to know where to begin or which financing option is best for your business.

According to a report by the National Small Business Association, 73% of small businesses that applied for funding in 2020 experienced financial challenges due to the COVID-19 pandemic. This significant setback shows the importance of securing financing to weather unexpected economic downturns.

What are some ways to raise money as a business?

There are several ways to raise money as a business, including:

  • Taking out a loan from a bank or building society
  • Seeking investment from venture capitalists or angel investors
  • Entering competitions to win prize money for your business
  • Crowdfunding through online platforms like Kickstarter or GoFundMe
  • Selling equity in the company through an initial public offering (IPO) or private placement
  • Offering pre-orders to your customers

How can I determine which method is right for my business?

The best method for raising money will depend on your unique business needs including your timeline, the amount of money needed, and the level of control you are willing to surrender to your investors. There are no right or wrong answers, and the right method for your business will depend on your specific requirements.

What are some tips for preparing to raise money?

To prepare for raising money, it is essential to be clear on your business plan. This plan needs to clearly outline your company’s goals, operations, and financial projections. 

You should also prepare some insights about  your market and competition. Try to build an understanding of the potential risks and challenges your business may face, as well as how you plan to tackle them. 

How can I make my business more attractive to potential investors?

To increase your chances of securing financing, you can focus on ways to make your business more attractive to potential investors. This can involve building a strong track record of success and growth. 

Demonstrate consistent revenue and profit growth, as well as collecting evidence of a loyal customer base and strong partnerships with other businesses or organisations.  Be sure that you can explain a clear and compelling vision for the future of your business, and to communicate this effectively to potential investors.

How can I manage my business’s funding effectively once I have raised it?

Before raising the money, try to have a solid plan in place for how you want to spend it. This includes establishing a clear budget, tracking expenses, and regularly reviewing financial reports to ensure that you are on track to meet your goals. Finally, it is important to stay focused on your core objectives and avoid taking on unnecessary risks or expenses.

You will also need to maintain open and transparent communication with your investors or lenders. They must be informed of your progress and any challenges you may be facing. 

What are some common mistakes to avoid when raising money as a business?

Some common mistakes to avoid when raising money as a business include:

  • Not having a clear plan or strategy for how you will use the money raised
  • Overestimating the potential success or growth of your business
  • Taking on too much debt or giving up too much equity in exchange for financing
  • Not communicating with investors or lenders, or manage expectations

How long does it typically take to raise money as a business?

It can take between a few weeks to several years to secure financing. For some products such as a cash advance loan, this may be available in just a few days or hours, but it often comes with a high interest rate. 

Other more sophisticated funding such as VC or angel may take months or years to come to fruition. The time it takes to raise money as a business will vary depending on the method of fundraising and the specific circumstances of your business. 

Factors that can impact the timeline include the size of the funding request, the specific requirements and processes of your investors or lenders, and the level of competition for financing in your industry.

What are some alternative sources of funding for businesses?

Some alternative sources of funding for businesses include:

  • Grants from government agencies or private foundations
  • Microfinance organisations that provide small loans to entrepreneurs in developing countries.
  • Corporate partnerships and sponsorships that provide funding in exchange for marketing or other benefits

How Can You Manage Your Small Business Finances More Effectively Using Loans?

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StrategyDriven Managing Your Finances Article | How Can You Manage Your Small Business Finances More Effectively Using Loans?

Using loans effectively can be critical for any startup business. It can give you access to a lot of areas you might not have been able to explore before. There are a few different types of loans you might need to consider, and they can help you to fund your business correctly early on and encourage you to make the best financial decisions possible.

Why Are Loans Vital to Small Businesses?

Business loans are an option available to businesses to help with finances. Much like any other loans, they come with interest to pay, and there is also variable loan vs fixed to consider. Also like other types of loans, a business owner’s credit rating can be a deciding factor in whether a loan is approved or not, and it impacts the interest rate of any loan as well. Knowing this at the start can have massive repercussions for the future of your business, and can get you off to the best start possible by helping you to afford equipment and services, that you might not have done otherwise.

1. Using Loans to Combat Downtime

Using a loan to tackle the issue of downtime can be a good decision for any starting business. This can be due to what you can (or can’t) currently afford for either training your employees or getting better and more reliable machinery into the company. This can help you to get certain processes running more efficiently so that when there are any little hiccups, problem-solving doesn’t take hours out of your day. This kind of efficiency saves money in the long run, but it also costs money to get started – the kind of money you might not have just yet.

2. Using Loans to Automate Systems 

Automating repetitive operations can be important for saving you both time and money. This is because automation can firstly reduce downtime, and secondly, take a lot of pressure off of employees. This can make all the difference when you are starting, where everything is up in the air, more than a little chaotic, and everyone is putting in some serious hours. Automating long and laborious tasks, such as certain HR jobs and parts of project assembly, can help you to create a far more efficient business, and take a lot of work away from your overly stressed employees when it matters.

3. Using Loans for Internal Promotions

Internal promotions are cheaper than external promotions. They are also far better due to the very important fact that you are already familiar with your staff, and they already know the business – even at this early stage. It also increases employee loyalty throughout the company too, as other employees will know that they can improve their station within the company. However, you might need to get in a little extra money to cover the costs of mistakes and also make sure that your employee has the best start possible in their new position, such as getting them any new equipment they need, especially if the role is new in the company.

4. Using Loans to Help With Outsourcing 

Outsourcing is great for both new businesses and well-established companies. There are so many ways that your business can benefit from outsourcing. However, outsourcing can be very expensive, and getting the right service for your business might take a few tries to get right. You will find that by taking out a fixed loan, you will be able to trial a few services, such as IT, HR, and even marketing, to source the best solution that you can, which is exactly what you need to get a head start on the competition.

5. Business Intelligence 

BI software is a powerful tool for your company. However, like a lot of things in the business world, it can be expensive. You will find that by finding the funds to get the software up and running, you will get great benefits from it. It is an investment that can help to propel your business marketing, data analytics, and product design, and can help you generate ideas that will shape your future business.

To Wrap Everything Up

The right loan is a vital tool for any business, but critical for small or startup businesses. You will find that they can open doors to a huge number of new opportunities for your business, whether that happens to be software, services, or outsourcing. This can help you to build a better business from day one, and help you get the boost you need early on to establish to your customers that your business is here to stay, all while diligently managing your finances to make the best decisions for the future.

Creative Fundraising: 4 Deliciously Sweet Ways to Get the Job Done

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StrategyDriven Managing Your Finances Article | Creative Fundraising: 4 Deliciously Sweet Ways To Get the Job Done

When it comes to fundraising, it can be challenging to find unique and effective ways to garner attention and support. However, there is one deliciously creative option that has been gaining popularity—doing a Krispy Kreme Fundraiser.

By organizing a Krispy Kreme fundraiser, you can offer your donors a sweet and tasty incentive to support your cause. Not only will your supporters get to enjoy the mouth-watering treats that Krispy Kreme is known for, but your organization will also be able to reach its fundraising goals

Here are four deliciously sweet ways to get the job done:

1. Bake Sale

Bake sale is a fun and classic fundraising idea that never gets old. You can host a bake sale or do a Krispy Kreme Fundraiser with a variety of flavors and styles and sell homemade. Get creative in your offerings by using a variety of recipes, and ensure you deliver the sweet treats in bulk. This means you will have to pay for larger quantities of ingredients and easily keep your costs low. For example, if you are raising money for a local charity, you can bake some delicious doughnuts or cookies using ingredients from your local grocery store.

2. Candy Grams

Everyone loves a sweet surprise, and candy grams are great ways to get people excited about your cause and get them involved in the fundraising process. You can sell candy grams for a specific holiday, such as Valentine’s Day, Halloween, or any occasion. They can also be sold individually in wrapped foil or cellophane bags with a donation card for extra cash.

3. Chocolate Bar

Another creative way of getting a fundraising job done is the chocolate bar fundraising idea. The best part of this fundraising idea is that you can make it as interesting and simple as you want. You can set up a table with all different kinds of chocolate bars or give out little sample bags of various flavors, such as milk chocolate, dark chocolate, and white chocolate. Also, you can let people buy their own bars and pay for them at the end if they like them so much or if they want to avoid buying any. It’s easy to do, and everyone loves chocolate.

4. Ice Cream Social

Host a social event featuring an ice cream bar or an ice cream truck, and sell scoops for a set price. At the social event, you can offer a variety of flavors and toppings, such as sprinkles, hot fudge, and whipped cream. Also, you can offer different types of cones, such as waffles and sugar cones, so people can sample and choose their favorite before settling on their preferred flavor. This is a fun and straightforward way to raise awareness about your cause while providing something delicious at the same time.

Conclusion

Getting a creative fundraising job done does not have to be daunting. Thus, by adding sweet treats into your strategy, you can make the process more enjoyable and effective. The four ways highlighted above are the deliciously sweet fundraising ideas that are sure to capture the hearts (and taste buds) of your donors.