From time to time, you can lose money or miss out on opportunities to make more. This can be costly. You can drain your profits, fail to grow or even stay in business at all if you aren’t careful. Discover how to avoid these potential problems using the tips below.
1. Overly focusing on the big picture
While the term “go big or go home” can fuel motivation and allow you to shoot for the stars, it can be an all or nothing motto that can ultimately set you up for failure and potentially tank your business. While it’s great to lay out a big plan, it can pay to start small in the beginning.
Popular personal finance podcaster Joe Saul-Sehy of the award winning show Stacking Benjamins says that new entrepreneurs often overly focus on huge long-term goals. He explains that it makes them lose sight of simply doing what’s necessary to stay in business.
Saul-Sehy also points out that another problem is that they fail to do basic math. He explains how they tend to overlook one simple calculation and answer the question: “How much money do I need to bring in each day to just keep the lights on?”
He goes on to say that this should be the primary goal in the beginning. Focusing on the short-term actually helps you in the long run:
- Doing so serves as a reminder to keep overhead costs low. While there’s always costs you incur when running a business, figure out what you can reduce or get rid of without affecting the quality of your service or product.
- It also buys you more time to grow your business. You want to make sure you can support yourself and expand to hire a team.
2. Not taking advantage of free and affordable content
I don’t know how many books I’ve read that explain how you should seek out mentors and learn from the people who have already had success in a field that you want to pursue. Before the internet and social media, people only had access to others through work, face-to-face, or perhaps, someone they met at a business conference which can be limiting. It also didn’t guarantee that they would help you in any way.
Today, there are so many ways to learn from people no matter how far away they live or how successful they are for little to no money. You don’t have to know them personally either to be able to learn from them. From Facebook Live and YouTube to online radio shows, there are countless places to consume content from experts. Sometimes, I think we take that for granted.
If these people happen to have platforms like blogs, social media profiles or shows of any kind where they welcome questions, take advantage of these resources before spending a lot of money on courses. You can potentially get answers directly from the source.
For instance, Today Show Financial Expert and Author Jean Chatzky runs the podcast called Her Money. She solicits money-related questions from listeners that she answers toward the end of the show. Reach out and ask a question. There’s no guarantee that she’ll have time to answer during the show, but it can’t hurt to try.
Though suggestions customized to your specific situation would be ideal, you can sometimes get in-depth answers from their website or in free e-books they may offer. For example, Chatzky’s site offers a free financial guide for military service members in e-book form as well as books for sale. Grab a copy of one of a bestseller or get your hands on her new release, Age Proof Living where she joined forces with Dr. Michael Roizen to focus on the cross section of health and wealth. It gives tips to live a longer, healthier life while maintaining financial well-being.
3. Unknowingly lowering your rate
One way to guard against losing money is to protect your time. This may mean establishing boundaries. Let team members know you need to devote extra time to your project and can’t be interrupted. Shut off notifications on your phone and minimize any other distractions.
You might even have to train your clients to stick to the scope of work you mapped out together. Book Coach Barbara Grassey emphasizes managing expectations from the start to avoid what she calls “mission creep”. It’s when clients start asking you to do more work than expected outside of the agreement without compensation. Though you might get caught off guard and accidentally agree in the moment, keep this script handy to curtail these types of requests.
Grassey suggests saying “I’m happy to do that for you. It’s not what we originally discussed, so that will add an additional $xx.xx to the project” or “Let me price that out for you.” She adds that managing expectations from the start establishes clear boundaries and sets the tone for how you will work together.
For instance, many freelance writers build two rewrites into their pricing. If you’re a graphic designer and you do logo design, maybe you offer a logo with up to 10 revisions wrapped into the original price. If additional revisions are needed, they can be purchased at X amount. They know from the beginning that they will have 10 and any other changes.
Be sure to solidify what you discuss in writing by mapping out the scope of work with your proposal, create a rate sheet or list it on your website. Explain precisely what the client will get in exchange for payment. She adds that if the nature of your work involves some amount of revision, be sure to account for that and set a limit to the change orders.
4. Not accepting credit cards as a form of payment
When starting out, you might want to dodge fees that are associated with accepting credit card payments. While it’s okay to start out in a bare bones fashion with certain expenditures, you can indirectly limit your business. You might want to address how you accept payment.
If your business accepts credit card payments, there are many perks that go along with this. You can expand your customer base, get paid faster and potentially reduce transaction costs. Another perk is it provides a streamlined way to handle billing. Shop around and see what works for you when it comes to accepting different payment methods.
The Bottom Line
Though no one is perfect, sometimes we unknowingly let our money slip away from us. Try to be more aware of these mistakes in the future and avoid them as best you can.