6 Money Traps Small Business Owners Should Avoid

By Joseph Stark

Starting a small business is what the American Dream is all about; however, more small businesses fail than succeed because of common traps. If you’re thinking of starting a small business or have already taken the first step, you need to be wary of these six pitfalls that destroy small businesses.

1. Failing to Set Goals and Create a Plan

Planning and setting goals is the first thing to consider when starting a business. With a clear plan, you know where your company is going and how to get there.

The first step is to define your company and your customers. This knowledge is the foundation on which you craft your business goals. With clear goals in mind, begin planning what steps you need to take to reach those goals, what skills you’ll need, and how much it will cost. Make sure your goals are obtainable and craft both long-term and short-term goals. Before making any major business decision, ask yourself if it is going to help you reach your goals.

2. Practicing Poor Marketing

Knowing your business and customers allows you to create an appealing brand. Your brand shows what makes you different than the rest of your competitors. Make sure your marketing always reflects your brand and stay consistent.

When developing marketing, keep your customer in mind, and create ads that appeal to them. For example, if your customer base is young, hip, and technologically savvy, they probably don’t read the newspaper, so don’t waste money by placing an ad where they’ll never see it. Instead, focus on social media and Internet advertising.

3. Hiring Inexperienced Employees

Inexperienced employees cost less short-term because of lower wages, but long-term, they end up costing you more in money and time. Inexperienced employees cannot perform their job successfully, forcing you to train them, which may mean sending them to classes or taking time out of your own schedule to train them.

Even if you try to cultivate an inexperienced employee, they may not be willing to put in the effort to grow or do their job the fullest. You get what you pay for, so when you pay the bare minimum in wages, employees are more likely to do the bare minimum at their job.

4. Paying Too Much for Office Space

Your business needs an office, but you may be paying too much for your current office. Two of the biggest factors in determining the price of office rent are size and location.

Start by examining your short-term goals. Your office size and location should be based on your short-term goals, not your long-term goals. For example, if you have an office that can hold 50 employees, but you don’t expect to have 50 employees for another seven years, you’re wasting money. Downsize to an office size and location that allows you to meet your short-term goals without wasting money.

5. Paying Too Much for Utilities

Besides everything else you pay to keep your business functioning, you also need to pay for utilities. With the increase of new technology, the costs of utilities are increasing. You don’t just pay for electricity, gas, etc. anymore. Now you need to pay for internet and mobile phones, too.

Eliminating a utility is not an option, but you can save significant money each month by comparing the costs of different providers and finding the least expensive option.

6. Keeping Bad Records

Money comes in and money goes out, but where is it all going, and where it is it all coming from? If you can’t answer that question for every cent that your business makes or spends, you’re keeping bad financial records.

Be sure to keep impeccable financial records that are easy to find and easy to search. This way, they can become a tool for growing your business as you develop new goals and plans. For example, if most of your sales come from online, you can create a plan to expand your website and reach even more customers.

Don’t let these traps defeat your small business. Take the first step in creating a successful business today by defining your business plan.

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Joseph Stark
Joseph Stark is a freelance writer, tech geek and world traveler.

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