Starting your own business or side hustle can be a great way to follow your dreams, take control of your career or supplement your existing income. Diving into your new endeavour with passion is a great way to start, but it also pays to pause, do your research and tackle this project strategically. Here are some common money mistakes entrepreneurs make when starting out, and suggestions on how to avoid them. Congratulations on your exciting new venture, and good luck!
1. Underestimating costs
If you’re going to make money, you’re probably going to spend a little money to get there— and it’s important to anticipate just how much you’ll need. Getting deep into a business plan and then realizing you can’t afford to proceed is a huge disappointment, so start by thoroughly researching costs and creating a detailed budget that involves a contingency fund. Depending on the type of small business or side hustle you’re starting, you may even qualify for government grants.
2. Considering your own time and labour “free”
Whether you’re spending 20, 40 or 60 hours a week on your new business, that time isn’t free. Be sure to understand the value of every hour spent and make decisions accordingly. If you are losing paid work hours to work on your new venture, make sure those hours are adding real value to your new business and are likely to result in earnings down the road. If you need to cut back on the time you’re spending on your start-up, begin by cutting out unnecessary tasks, finding efficient tech solutions for regular administrative tasks, and outsourcing what you can afford (accounting, cleaning or delivery, for example).
3. Making decisions based on cost instead of quality
You may not be able to afford the best of everything, but don’t go for the cheapest option just because it’s there. Assess where you need to invest in quality and where you can cut costs, and find a balance that works. Your customers will notice quality (or a lack thereof) and this influences their purchasing decisions, so keep that in mind when making decisions.
4. Not investing enough money
Even if you’re providing a service that requires no up front cost to you, such as dog walking or babysitting, consider the importance of investing in your business. For example, marketing and advertising are critical elements to success. You can definitely emphasize word of mouth marketing to save money, but don’t rely on it 100%. Social media ads, influencer marketing or a direct mail campaign may be good options, depending on your line of business.
5. Hiring friends and family members
They may be well-intentioned, cheap or even free to hire, but mixing business and pleasure can be a recipe for disaster. Sure, there are times it makes sense and works well, but consider your friend or relative’s skills, availability and motivation before taking them on. If your business or relationship ends up suffering, it won’t be worth the financial savings.
6. Forgetting customer service
Want to make money? Be better than your competitors, starting with your customer service. This element of your business feeds into future referrals, your reputation in the industry, your online ratings and how customers talk about you on social media. After all, it just takes one review (good OR bad) to set the tone for how your business or side hustle is perceived!
7. Underpricing your goods or service
Selling a product or service only translates into profit if you’ve priced it out correctly. Before setting any prices, do your due diligence: what does it cost you to make or provide what you’re selling? What are your competitors’ prices like? How can you be priced to sell and still make money? These are critically important questions to ask yourself if you want to create income instead of debt.
8. Forgetting to keep receipts
When tax time comes around, you’ll want to make as many business-related deductions as possible— so keep those receipts! Save invoices in a binder or digital file, consult with a tax professional if necessary and always, always have a record of all money earned and spent. Bonus: if you’re working from home, you’ll be able to file for additional income tax deductions!
9. Racking up credit card debt
Credit card debt is not a good look for anyone, especially a business owner. Instead of swiping for every business-related purchase, consider a personal loan from easyfinancial - it comes at a much lower interest rate than any standard credit card and gives you access to a lump sum of cash for whatever you need. Approvals are quick and easy, and you’ll be glad you avoided the credit card trap.
10. Using out of pocket funds to pay for everything
If you’ve been in business for six months or more and are earning steady income, consider a small business loan from easyfinancial. With great rates and a simple application process, you’ll be happy you did! To learn more, please reach out to your local easyfinancial branch or easyhome branch. You can also give us a call at 1-888-502-3279.