Financial mistakes by the startups are the most obvious thing. It just comes with the territory. However, if you want to succeed as a startup, you have to commit mistakes, learn to take risks, adapt to the changes quickly and when we talk about finances there are some mistakes which you cannot afford to make.
Here we are going to share three such mistakes that have destroyed many promising startups, do make sure that these mistakes do not kill you.
“To err is human, and each error makes you learn something good.”
- 1. Misjudging the Market Potential
This is the most common of all the mistakes and it kills many businesses before they start their journey. The problems you might face:
- Coming up with new ideas for the new kind of service
- Asking family and friends about their personal opinions
- Friends and family encourages to move ahead with a great idea
- You invest 6 months to sketch a business plan, make a website, and have a little bit of funding
- Launching the service but with no returns
The best way to make your business succeed is to use the Google Adwords Keyword Tool and check whether anyone is searching the products or service that you are going to offer. Confirm whether your product/service has a market demand before you invest your precious six months.
- 2. Running Behind Huge Contracts without Funding
One major financial mistake that the startups often make is chasing large contracts. We have seen that many startups chases after the large contracts without having the proper funds to finish their projects. For example, a construction company, they might a bid a project of $400,000 and even win the contract, but without any funding, and if they are devoid of 2 years of financial history, no bank will lend loans. If you are a startup, you have to bid low, giving little room to profits.
- 3. Cash Flow Mistakes
This is the last mistake that you cannot ignore. The cash flow projection mistakes can kill your chances of success.
When You Fail To Plan For The Bad Debt Expense:
In most of the industries, some of the customers do not agree to pay. If you have to maintain the account in a receivable order, then you have to keep positive cash balance, and set yourself for the failure.
Numbers of Days Required To Get Paid
There are certain industries and projects, which are not going to pay you for the months. You may have a term of 30 days but you might meet up with customer, who won’t pay you for the next 90 days. For that, you need to have a backup plan.
These are the three financial mistakes, which are full of errors and hard to overcome for the start-ups. The simple solution is to plan. We know that there are some mistakes, which you simply cannot avoid. However, you should stumble upon the chances of success by ignoring these mistakes, which are actually avoidable.