One of the biggest reasons people talk themselves out of being an entrepreneur is money, or lack thereof. And then there are those who go all in but with limited resources. They immediately feel the pressures to succeed, and succeed fast, because time and money are in short supply.
Especially in the beginning phase of an entrepreneurial enterprise, money will be a main concern. Is there enough? Where is it needed the most? Did you spend it wisely? Are you running low on money? When will your business make money? Will people even want your service or product enough to pay for it? Was this all just a giant money pit of an idea?
If you do your research first, you’ll save yourself from lots of financial headaches, as many new entrepreneurs will dive right in and simply hope for the best. If a lack of money is their main driving force, then their desired result will usually poorly perform or fail.
There are many common financial issues that occur in the entrepreneurial world. Let’s look at a few of the monetary problems that might be coming your way, and how to get through them without being paralyzed by fear in your business.
Is Your Bank Account Pressuring You?
In business we have to make all sorts of decisions, and some of them very quickly. What’s more, we have to always be aware of the overall financial picture so we can make sound decisions.
One very important distinction a new entrepreneur has to learn how to make is the difference between personal and business needs. For solo entrepreneurs especially, there is a high risk of dangerous overlap between the two because businesses are often started and maintained for very personal reasons, and there is nothing wrong (in fact, it can be a great asset!) for personal and business motivations and activities to be strongly integrated with one another. However, in accounting, they need to be clearly separated to keep a clear picture of what’s going on with each to recognize and deal with any threats or opportunities that may come up.
Once this is done, the next thing that needs to happen is to take your personal accounting just as seriously as your business accounting, because your business success depends on your personal stability to be able to manage and invest in it to it its full potential. While it’s ideal to get your personal finances to a good place before starting up a business, in reality this rarely happens since problems with personal finances are a common catalyst for pushing people into new ventures in the first place. So very likely you’ll be facing learning how to develop and manage two different systems of accounting at once, which may be very unpleasant but could well be the most valuable investment you can make early on since doing extra work to make extra money will just become wasted effort if that money is leaking out somewhere else in your system.
The Costs of Growth
It can be tempting to think of business as a simple input-output system where simply putting more into it will generate more out of it, but the truth is that most profits are made not from the value of the raw materials or effort involved, but from the business’ skill in processing them to their greatest potential.
Growth is expensive in many cases. For example, you may find your time slipping away and become desperate to have extra hands help you. This means you’ll have to pay for that extra hired help. Don’t be afraid to grow slowly if that’s the best route to maintaining stability while you build a good foundation for your business. Always remember that increasing your skills or processing capabilities through better education or tools can also be an option to increasing profitability without necessarily increasing workload. However, taking on some temporary costs to bring in greater revenue, move on unexpected opportunities, or free you up to attend to higher-value tasks can be a good investment provided you will see the returns quickly enough to not strain your vital operations. In making such decisions, timing is a critical factor to consider in addition to the numbers.
Fear of Failure
Fear of failure is the driving force behind many of the decisions we make. First of all, you really need to let go of the fear of failure. Fears hold you back. If you are playing it safe simply because you don’t want to fail, you aren’t making your decisions based on success. And honestly, failure isn’t the end of the world. In many cases, it’s actually one of the costs of doing business that you need to account for in order to gain the experience you need for long-term success.
Invest in yourself personally as well as professionally, as you are your business’ most valuable asset. No matter how great your business model is, it can all come crashing down quickly if you become too personally challenged in your health, education, or relationships to keep maintaining it. Plus, no matter whether your business succeeds or fails, what you put into yourself through the experience will remain yours to keep forever. As a matter of fact, most business owners don’t succeed on the first or even second try, but find success through the accumulated gains made through their ventures.
Are You Charging Too Little?
Oftentimes when we first start out in business, we haven’t done enough market research to find out what to charge others for our products or service. We want to be fair and reasonable. We want customer retention. We want them to spread the word to their friends and family and let the whole world buy from our business.
Therefore, we typically end up charging too little for our products or services thinking we will get lots of customers to get us started and we can always raise our prices later.
Do the research and find out what others are charging, but more importantly what others are paying for the same thing you are offering in your business. What is your time worth? How much time do you spend filling an order or creating a product? Don’t be afraid to ask for what you are worth. Because if it’s truly something the public needs or uses, they will pay a fair price for it. If not, then you may need to adjust what you are offering to increase its market value or improve your processing methods to lower your costs of production.