An entrepreneur must take into account all aspects before deciding to begin a new business, such as lack of profits at the beginning, unexpected expenses, mismatches between payment due dates and some other aspects that might carry a company to financial disasters if they are not considered.
“Any entrepreneur should always consider that at the beginning of any business, the lack of incoming money, can be a financial problem, so they should always count with funds for sudden expenses”, commented Salomon Juan Marcos Villarreal, president of Grupo Denim, about this topic.
These are some common financial mistakes that an entrepreneur should always try to avoid:
- Poorly planned Budget – One of the most common financial mistakes are to make a budget without considering the medium term needs first, as it would be by then when new investments should be done again in order to face the market, if this is not planned correctly, the entrepreneur can end at the beginning, so it is basic for a company to make financial plans from one to three years to the future, or up to 8 years for an industry. This plan, as its name shows, is only that, it is not necessary to be so strict about it, this plan should be checked and adjusted continuously, depending on the company’s needs.
- Fixed expenses – An excess of fixed expenses can be the cause of a company’s failure, as there are many different aspects to consider before a new business begins. If an entrepreneur opens a business with many customers but if it is not on a centered place, you will not get too many customers, this means that the fixed expenses will be higher than the profits.
- Excessive indebtedness – Another common mistake of an entrepreneur is to finance its business from its own pocket and get a bank loan for the rest, this could be the end for any businessmen. You should always consider that failure is not always due to the lack of customers only, it might be sometimes due to a wrong calculation of expenses and incomes.
“Success of any business depends on a good balance within it, an owner of a company must always find a good balance for the company’s budget, considering all aspects, such as not receiving payments on time, and as long as you consider all possible aspects, you can avoid any financial mistakes that can put your company into risk”, added Salomon Juan Marcos Villarreal.