New Business Credit Card

Wednesday, June 13, 2012 at 3:03pm by Site Administrator

Common Mistakes Made by New Business Owners

Starting a small business is a major undertaking. It requires ambition, patience, endurance and a mental strength that can’t be matched in any other endeavor. The entrepreneur gets up every day and struggles with the latest challenges and obstacles. He holds the fort up and keeps the troops rallied against all odds.

Unfortunately, the average business fails within the first five years. This is especially true of the small business, where the pitfalls can be jaw dropping. Management miscues, under estimating competition, not planning appropriately, and more can play a part in a failing business.

Of course, the biggest mistakes most small businesses make are financial. Borrowing large sums before making a penny and being unable to repay in a timely manner has closed many a business door for good.

Here are some other common mistakes:

  • Co-Mingling Expenses
  • It’s not unusual for a business owner to use their own money to get started. Yet even that money should not be, per say, theirs. Co-mingling business and personal expenses is one of the biggest mistakes a new small business owner can make. It’s disastrous for bookkeeping purposes. Trying to break down business and personal expenses through your personal records will be a nightmare.

    Any and all funds that are intended for the business need to be separated, preferably placed in a business checking account. And used for nothing else. It will be easier to maintain records, locating specific transactions and preparing for the IRS.

  • Mo’ Money, Mo’ Money
  • Another common mistake is financial expectations. Seeing wealth at the end of a very short tunnel is unrealistic. It can take longer than you want to become a millionaire, or a thousand-aire, for that matter. Success and wealth building takes time, patience, focus and something called luck. It’s the discouragement that comes with discovering this that hurts most businesses. We’re prone to give up prematurely and the business becomes the last thing we wanted: a job. Every business will need time to grow. There will be downturns that have to be sat through.

  • Spending that Budget
  • In hopes of being fully prepared, small business owners can spend too much, in the long run hurting the business financially. Too many businesses go under after blowing cash on renting space, equipment, furniture, fancy brochures and business cards. You guess the projects will fall all over your desk and in six months you’ll have made all that money back. Unless you don’t.

    Plan to start the business on a budget of $1 and work from there. If you can get by with an email blast, do it. If any piece of equipment can wait, let it.

  • Pricing
  • Lower pricing but better service. It’s a common promotion for any business, let alone a new small business. It may even be true. Only pricing isn’t always a deciding factor for customers. They are willing to pay for good product. Price cutting might draw them in, but it also reduces your profit. At the start, you’re going to need that. In the beginning, focus on product quality, service and reasonable pricing. There’ll be time for promotions and are-they-crazy sales later on.

  • Creditworthiness
  • Assess your credit risk. At some point you may need a loan. You might find yourself wanting to expand the business’s financial strength with a business credit card. A lot of factors can affect what happens here. If your business is new, your personal credit history may be taken into account. You may be asked to guarantee you’ll personally take on the business’s debt if something goes wrong.

If you do get a business credit card, don’t make the small business mistake of assuming all your problems are solved. Be frugal and practical. Continue operating on that $1 budget, going over that only when absolutely necessary. Never use it for personal purchases. If employees need a card, attach it to a single account, preferably with credit limits controlled by you.

Make sure you investigate what type of card best suits your business and needs. Often, small businesses take what they can get and regret it later. If your business requires a lot of travel, consider a card that’s generous about its miles program. If you want to avoid interest rates, look at business charge cards, instead of credit, where the balances are generally paid off monthly. If saving cash is a priority, then cash reward programs will be the way to go.

Comments (0) | Filed under:

No Comments »

No comments yet.

RSS feed for comments on this post.


Leave a comment