By David Olson
As a small business owner or solopreneur, growing a company is a challenging, exciting process. Along the way, you’re sure to have a few stumbling blocks — areas where you need to make key decisions to keep your business moving forward. One area where you don’t want to make mistakes is with finances. Small companies with a strong financial foundation are likely to grow over time, with fewer obstacles. Yet many business owners are not aware of or prepared for some of the most common (and worrisome) financial hazards. Here, take a look at financial pitfalls your small business could face, and how to avoid them.

You’re focused on what is coming in, not going out

A concern for most business owners is watching revenue grow. You anxiously wait to see if you’ve made more this month than last. Perhaps your attention is on end-of-year or daily sales goals. While concentrating on revenue is good, you can’t overlook what is going out, as well.

Calculate expenses just as often as your revenue. If you’ve updated or changed your business model, taken on more debt, or made a big purchase, that will impact your bottom line.

Using early startup funding too fast

It’s invigorating and exciting to receive a fresh source of revenue for your business. After all, this should help your business continue to move forward. However, receiving funding means you need to pay even closer attention to how you spend it. It’s not uncommon for business owners to run out of funds too soon, leaving their growth potential lacking.

Pay attention to every way you spend that investment capital. Even if you are bootstrapping your business with personal savings, be careful about big purchases that could wipe out your funds fast — leaving you looking for investors.

Holding onto a business model that is not working

Your business plan is sound — or so you think. While you may be working it just as you planned, if the sales are not coming in as needed, it may be time to consider a few additional solutions. For example, find ways to tweak your business model to better meet customer needs or to draw in a larger base of potential customers. It may be an update to your marketing campaign, or a slightly modified product or service that makes all the difference.

Lacking clear goals

Of course, what business owner wouldn’t want to be successful? Do you plan just to make your financial goals for this month or year? Are you looking long term to consider opportunities and goals? Without solid goals and insight into your options, you may be limiting growth potential and scale.

Proper financial management means creating, working and modifying goals — over the short and long term. This insight is essential to help you achieve consistent growth.

Paying attention to your business model is crucial, but it is just as imperative to think about the expansion of products or locations, franchising, and other growth avenues.

If you don’t have a financial plan in place now, you may have no idea where your business is or where it is going. A few minutes spent working through these financial snares can help minimize risk to your business, put it on the right path for sustained growth, and allow you to accomplish more.

For further information on financial traps of which to be aware, be sure to consult the accompanying guide.
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David Olson founded Virtual CFOs, LLC in 2003, long before the concept of a part-time CFO became well established. His previous 28 years of experience in private industry and public accounting made that possible. Since founding Virtual CFOs, he has helped dozens of companies improve their financial IQ, operations and prospects for success.

Sources
https://www.slideshare.net/VirtualCFOs/financial-pitfalls
https://www.entrepreneur.com/article/272403