Top Common Mistakes Entrepreneurs Make

1.You think that all the money from the company is in your hands.

Entrepreneurs are often living in the mindset of "I is my business and and company cash is my bank account." If they wish to take a trip then they withdraw the money from the checking account. If they want to fuel their vehicle, they return to their checking account. They are the owners, so they're in a position to fill it.

They can't.


If you operate on a prepayment basis it could very well be clients' money which you've already spent even though you've not fulfilled your obligation to them yet. For instance, you create websites, you spend the money, but then the client decides to change his mind and wants the cash back. There's no way for you to get the money returned.


You may need this cash in the near future. For example, on 10th you transfer money from your account in order to buy the purchase of a new phone. Then on the 20th, you need the funds to cover your employee's wages. A few of them may be unable to earn their salaries due to the fact that the phone was purchased with money borrowed from another.


2. You're trying to increase sales

People who are entrepreneurs, and adults ignore the notion of "profit" and judge their businesses based on how much money that is in the checking account. It is actually much easier to quantify than profit, if they don't talk about the efficacy in their job.


An example is that an entrepreneur made 500 bouquets over the course of one month. The average of $30 for each bouquet. When he multiplied these numbers, he got 15,000dollars. Then, he subtracts the amount of purchase he can afford and a portion, for example 8000dollars. It's normal. He was rewarded, and happy.


If you subtract wages of salespeople, transport of goods, the rental of the premises, marketing costs and taxes, you will not get 8 , 000, however 2 000. Try the blank pay stub template to calculate your profits, which includes tax and other costs.


3. Can't quantify management decisions

Each business action must be evaluated using the lens of profits. There aren't any good or bad management choices; there are both profitable and unprofitable ones. However, entrepreneurs don't consider the impact of their decisions.


Do you plan to boost the rate of conversion? Design a sales funnel to determine the kind of growth in profits and revenues it will result in at the final. Are you looking to automatize some of your processes? Calculate the amount of time that your employees can free up. Consider if the time could be used more profitably.


How can you avoid these situations?

Profit from businesses for yourself in accordance with your specific roles.

There are two roles you could play director and owner. The director is entitled to receive dividends from the profits. Find out what percentage of profits you'll take for yourself, and adhere to the percentage. The director has the right to an income. Take a look at the amount directors make and then set the exact amount.


Dividends, as well as the director's salary are yours. All other expenses are business.


2. Keep in mind the fact that an increase in revenues isn't always a guarantee of increased profits.


Open any economics textbook. It states that when the amount of sales rises then the price will decrease and the price per unit of merchandise rises. One sells 10,000 units each month, and is at losing money, while the other one sells 1,000 units and earns make a profit. The increase in sales is only as long that it leads to the company a boost in profits.


3. Develop a financial model if you're planning to make a change within your company.


The financial model can be described as a type of table which demonstrates how changes to one particular measure impact all other measures including the most crucial net profits. It helps you discern whether you should be working on this or that particular figure or if the model is not working.