At least eight out of 10 start up businesses fail during the first 18 months, Forbes reports. Successfully funding and managing a new company can be extremely difficult. Even so, a great deal of businesses go under unnecessarily. There are relatively simple steps entrepreneurs can take to avoid common financial pitfalls. Here’s what you can (and should!) do:
Pay Off Personal Debts
The Small Business Administration (SBA) makes it perfectly clear: you are highly unlikely to secure a small business loan if you have any unpaid debts. “This is a tricky one for young entrepreneurs, especially if you are paying off student loans or credit card debt. Your chances of getting a business loan are seriously diminished by debt, even if you have the projected income to repay them,” the SBA explains. Even if you do not need a loan or financial assistance right away, you may easily need help in the future. Pay off all debt to open up your options — now and when you may need it most.
Stow Away Some Cash
New business owners should always have a reserve of extra cash, the Small Business Administration adds. According to the SBA, “The costs of going into business aren’t always high, but there’s a good chance that you won’t start to make a profit immediately, and you will always need to put cash aside for tax, regardless of your margins.” Avoid blowing through cash reserves too quickly. Reconsider extravagant expenses. Instead, focus on investments that will draw more customers or clients to your product or services.
Hire Good Accountants
One of the easiest pitfalls to fall into is going it alone. Finding an accountant for a small business is an extremely worthwhile venture. The SBA continues, “Getting expert help from an accountant or tax advisor can go a long way to making sure you are in compliance with tax regulations and avoid a common tax mistake … that of paying too much tax!” Good accountants for small businesses can also help you devise a strategy to get out of financial hardships — if need be.
Heed basic accounting tips to persevere through the first 18 months of your business. Pay off debts, always keep a sizable cash reserve, and hire a quality accountant to support — and contribute to — your efforts. Find more: www.sp-pc.ca
