All Treat no Trick: 3 Tips to Avoid Financial Horrors
Every successful entrepreneur has gone through years of making mistakes before they were able to find a sound risk management approach. Knowing some of the common mistakes that these successful entrepreneurs have experienced might help you make better business decisions that give your business all the treats without the trick this Halloween. Use these 3 tips wisely to keep you on track to reducing your overall business risk and avoid financial horrors.
Here are 3 Tips to Avoid Financial Horrors:
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Do not underprice your services.
Budding business owners have this tendency to mark their products or services at the lowest possible price that sometimes reaches the point that the business owner only breaks even from his initial investment on the product or service. The idea is that low prices might attract customers and it might differentiate the business from other businesses in the same field.
However, as days go by, your operating expenses will also increase. Your once loyal customers that you have acquired due to your enticingly low prices might feel offended if you raise your prices. Now you are set with the dilemma of raising your prices to match your operating costs and risk losing a large chunk of your customer base.
The wiser route would be to come with a more effective way to differentiate your services or products from your competitors. It is near impossible to make a profit if your product or service is priced too low. Avoid this financial horror by finding the unique proposition of your business to differentiate it from other services or products.
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Borrow money wisely
Qualifying for a business loan can feel like quite an achievement. After all, it means that lenders see your business as sustainable and profitable enough to lend it money. However, just because a lender approves you does not mean that you need to take on the debt. Banks and other lenders make profit by collecting interest on various types of loans, including business loans.
The best way to mitigate the financial horror of being drowned in debt is to pay interest as low as possible. If your business really needs additional funds to keep it afloat, borrow only what you need to help your business grow. Paying high interest rates increases your risk with this financial horror.
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Do not put all your eggs in one basket
Think of your business as a you would think of your stock portfolio. When it comes to the investments in your portfolio, the majority of your business’ revenue needs to come from multiple sources. Oftentimes, startup owners tend to spend most of their time serving their early customers. Prioritising on only one block of your customer base will make it hard for you to venture into other markets and build new accounts. Those early streams of revenue have a tendency to fade off over time. Avoid this financial horror by expanding your business horizons and build other sources of revenue as well.
Unspoken Mistake
There is one unspoken mistake that caused a lot of businesses to fail and that is neglecting your business financials. Your business financials give you a clear view of how your business is fairing in the short and long run. It helps you identify your business’ strong and weak points and lets you address those immediately. Most startup owners start their business with a vision for their product or service, not everyone is expected to be a bookkeeping expert or bookkeeping savant immediately. Lucky for you we are in the business of helping small businesses. Send us a message and we will get in touch with you on how we can help you take a closer look into your business financials.
