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No entrepreneur starts off a business with the intention of having it shut down in a few months’ time. But the reality remains that 50 percent of businesses fail within the first five years. On the flip side, there are lots of businesses that have gone well beyond the ten-year mark and are still doing well. One thing that these businesses have in common are the wise business success habits that smart owners live by.
Related: The 10 Most Reliable Ways to Fund a Startup
There’s probably little surprise in the fact that those habits have to do with money and that how well your business will do over time has a lot to do with your money habits today.
That doesn’t mean those habits are formed early: Sadly, schools don’t really teach kids how they should handle their finances, and that’s why as adults we have problems in this area.
But if your business is doing well with sales and turnover yet your finances aren’t particularly encouraging, it’s pretty obvious that you are practicing the wrong money habits. Perhaps you’ve been doing so for years; but don’t lose hope. You can still make that U-turn to success. Here are those poor money habits and what to do about them:
1. Not having regard for “little money”
As a consumer goods entrepreneur, I’ve had to make some sales many times that were just above a dollar. At the time of the sales, I didn’t really regard those proceeds as “money.” But I usually got surprised when I added up all my income for the day and those dollar sales ended up constituting the hundreds and sometimes thousands of dollars I had.
Related: Five Common Financial Mistakes Startups Make- And How To Avoid Them
I had to learn that it is an aggregate of small sums that make huge sums.
Similarly, if you spend smaller denominations mindlessly because they are small, then: newsflash! You will not get very much built up in the long run and your business will have less and less access to actual working capital.
2. Not diversifying your business’s income stream
The average millionaire has at least seven streams of income, according to recent research. While it is true that focus is a big part of business success, many business owners have misinterpreted “focus” to mean running a solo business a certain way and trying something else.
Focus is not the same as being blind to opportunity. You can still be diverse within your area of expertise in the way you offer your service or goods and perhaps in your decision to offer allied products and services.
Diversifying is the most potent way to get a large market share and to subsequently raise income.
Disabusing yourself of the “focus myth” will open you up to observation, and consequently to a new world where opportunities can appear in any transaction and any conversation.
3. Not saving
This is supposed to be common sense, as saving is the most basic form of increasing the amount of money that you have. Sadly, though, very few people keep aside money for savings. Most people would rather give excuses. In fact, roughly half of Americans are saving less than 5 percent of their income.
When you’re running a business, you should commit to save some money no matter how much the sum. In my experience savings always come in handy, especially when an unexpected business opportunity comes knocking.
4. Not taking steps to reduce your credit card balances and debt
Business credit card usage usually has some risks attached. So it is not enough to decide to get a card; you equally need to learn how to use one responsibly. If you can, pay off those credit card debts as soon as possible and avoid using them so you can at least avoid the high interest rate they carry. You don’t have to pay off everything; just start with the smallest debts on your credit card bill, and work your way up consistently and without fail.
5. Not maximizing tax deductions and write-offs
There are certain legal avenues for tax relief as well as deductions available to you Not taking advantage of these things is unfair to your business. The sad truth is that many small business owners are unaware and unenlightened about how these deductions work and often feel that tax planning is a way to evade the system, or as some would say, “game the system.”
The truth is, it is perfectly legal and not even that complex to use tax deductions and write-offs to significantly reduce what you pay the government. How do you think large businesses with significant taxable assets survive? You may need to consult a tax professional to get guidance.
6. Not keeping yourself on a “salary”
You may not need to use the term “salary,” but the fact that you are a business owner does not mean you should treat all revenue as personal profit once you subtact your staff payments and capital expenses. Taking home regular pay at regular intervals is a way to show respect to your business.
Related: 5 Small Financial Mistakes that Can Lead to a Major Cash Crisis
Your business naturally grows when you respect it.
So, go on and build that empire!
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