The most common financial mistakes of entrepreneurs
Posted: Mon Jan 06, 2025 5:57 am
There has never been a better time to start a business than now, especially for young people who want to start their own business, as is the case for many Silicon Valley entrepreneurs.
They are an example to follow, especially when it comes to innovation and giving free rein to entrepreneurial desires, but it is also true that when setting up a company at such a young age, many tend to make beginner's financial mistakes.
In order to avoid the most common mistakes that entrepreneurs tend to make – some of which you could avoid by using business management applications –, here is a list of financial errors to keep in mind when setting up a company:
Liquidity deficit
It often happens that in the first experiences of entrepreneurship, when there is no accumulated track record, the future of the company is planned with excessive optimism, hoping to accumulate income in an almost unrealistic way. The risk here is that services or functionalities are outsourced that ultimately cannot be paid for.
Incorrect budget planning
In line with the above, it often happens that the financial plan is made incorrectly because the needs that will appear in the medium term are not taken into account. When venezuela number data these arise, then we do not have sufficient liquidity to face them.
Fixed costs too high
It is one of the biggest financial mistakes entrepreneurs make; having fixed costs that are too high is a huge burden when it comes to planning growth scenarios or, on the contrary, a problem when we do not achieve the expected income.
Stop investing in the business
When we start earning money, we run the risk of becoming greedy, of not wanting to invest that money in anyone other than ourselves. A newly opened business needs a long and constant investment; the first injection of money is not enough. Therefore, when we start generating income, especially at the beginning, it is good for this to return to the flow of the business so that it is in good health.
Getting into excessive debt
Debt is usually non-negotiable, almost 50% of entrepreneurs tend to finance the entire business with their own money, which can cause companies to suffocate due to a lack of clients. That's when we get into debt, but what if the company remains insolvent? We run the risk of mortgaging our personal assets.
Not properly calibrating the solvency of our clients
Encountering delinquent clients who fail to pay their bills in the first phase of our company can destroy the business, because at first, due to latent instability, any source of income must be well secured.
Not knowing how to differentiate between personal and business finances
We have already suggested this two points above: it is common for entrepreneurs to gradually withdraw money from the business account to cover personal expenses, and vice versa. But where do we draw the line? Any overlapping of expenses is often dangerous.
Not assigning you a salary
The company is yours, so you don't assign yourself a salary and instead you take, little by little, what you need. Serious mistake. You should have a salary like any of your employees, because that is the only way to control spending and avoid future cash flow tension.
They are an example to follow, especially when it comes to innovation and giving free rein to entrepreneurial desires, but it is also true that when setting up a company at such a young age, many tend to make beginner's financial mistakes.
In order to avoid the most common mistakes that entrepreneurs tend to make – some of which you could avoid by using business management applications –, here is a list of financial errors to keep in mind when setting up a company:
Liquidity deficit
It often happens that in the first experiences of entrepreneurship, when there is no accumulated track record, the future of the company is planned with excessive optimism, hoping to accumulate income in an almost unrealistic way. The risk here is that services or functionalities are outsourced that ultimately cannot be paid for.
Incorrect budget planning
In line with the above, it often happens that the financial plan is made incorrectly because the needs that will appear in the medium term are not taken into account. When venezuela number data these arise, then we do not have sufficient liquidity to face them.
Fixed costs too high
It is one of the biggest financial mistakes entrepreneurs make; having fixed costs that are too high is a huge burden when it comes to planning growth scenarios or, on the contrary, a problem when we do not achieve the expected income.
Stop investing in the business
When we start earning money, we run the risk of becoming greedy, of not wanting to invest that money in anyone other than ourselves. A newly opened business needs a long and constant investment; the first injection of money is not enough. Therefore, when we start generating income, especially at the beginning, it is good for this to return to the flow of the business so that it is in good health.
Getting into excessive debt
Debt is usually non-negotiable, almost 50% of entrepreneurs tend to finance the entire business with their own money, which can cause companies to suffocate due to a lack of clients. That's when we get into debt, but what if the company remains insolvent? We run the risk of mortgaging our personal assets.
Not properly calibrating the solvency of our clients
Encountering delinquent clients who fail to pay their bills in the first phase of our company can destroy the business, because at first, due to latent instability, any source of income must be well secured.
Not knowing how to differentiate between personal and business finances
We have already suggested this two points above: it is common for entrepreneurs to gradually withdraw money from the business account to cover personal expenses, and vice versa. But where do we draw the line? Any overlapping of expenses is often dangerous.
Not assigning you a salary
The company is yours, so you don't assign yourself a salary and instead you take, little by little, what you need. Serious mistake. You should have a salary like any of your employees, because that is the only way to control spending and avoid future cash flow tension.