Starting a new business is exciting. You’ve likely spent years forming those brilliant ideas of yours and spent many late nights researching. And now? All of that hard work is out there! If only that newbie business owner enthusiasm could be bottled. Sometimes though, that excitement can mean we skip over the important bits. These are some of the common mistakes I see lots of new business owners make, 5 Mistakes New Business owners make below!
one – Not setting up a separate business bank account
Being a bookkeeper, this is hands down the NUMBER ONE issue & most common mistake, but also the easiest to fix and get right from the start!!
Wading through bank accounts that include weekly shops at Woolies and nights out at the pub makes my job *so* much harder, chasing you up ‘hey, was that Kmart spend personal or biz?’ Along with making your poor bookkeeper cry into her coffee, not separating your money makes your business finances messy. As you grow, this mess will become well, messier.
If you only have business transactions to process you won’t be so overwhelmed and stressed by doing your numbers. You also won’t miss claiming that $2000 biz expense you whacked on your personal credit card.
So, start out right and ensure you have a separate bank account to track your income and your expenses.
two – Forgetting to factor in tax
Those early days of business ownership are a bit like early parenting. You take the wins and worry about the losses later. And that lure of actually keeping your dollars can be hard to resist. But, believe me when I say, that first tax bill will knock the wind out of you. Be smart and set aside a percentage of your income for tax.
The upside of doing this is, if you have deductions, you’ll likely have some leftover at the end of the financial year. Didn’t end up earning enough yet to pay tax – yippee some extra $$$ to reinvest in yourself.
three – Not securing business insurance
Business insurance can be really expensive, however, it’s a necessary expense and just part of being in business. Hopefully it’s unlikely that you will get into legal trouble but it’s not impossible and way more common than you might think. Social media managers can be issued copyright infringements, e-comm business can be liable for product failures…the list goes on! If the unimaginable happens, your personal wealth (including your house!) is on the table.
In short, get insurance.
four – Overspending
Another oh so common mistake new business owners make right here. Branded mugs, digital courses, fancy graphics, subscriptions galare and top-notch equipment, all the ‘shiny objects’ may *seem* like a wise purchase. BUT when you’re just starting out, overspending can really eat into your profit. By all means, spend where you have to but be very mindful of what you need now -v- what can be purchased later.
I like to allocate at least 10% of my profits back into the business and spend once I’ve saved. This money mindset means I don’t go without the cream.
five – Underpricing
On the opposite end of the spectrum is underpricing. At the beginning of your business journey, it’s easy to fall into a scarcity mindset, worrying yourself sick about winning work and selling products. So what does every new business owner do? Underprice/underquote and work harder to make bank. Instead of falling into this trap, strategise a fair price first. Remember, it’s not just your time or the cost of materials, it’s your tax, insurance, platform fees and general expenses that make up your price too.
No idea where to start on pricing your wares and what it all means? Grab my *FREE* Pricing calculator if you haven’t already. Plug in a couple of numbers and it will do the rest for you.
Have you made 1 or two of these common mistakes? All of them? You are not the first and definitely not the last. Don’t stress, you’re on the right track now you have me dropping in your inbox each week.
Most of them are super easy to fix or even avoid in the first place – after all you don’t know what you don’t know. I’m here to help!
Got something that you really wish you knew to do differently? Hit reply and let me know and I’ll keep it on the list for future blogs.