When your business begins to grow, it can be tempting to put your financial goals on the back burner. As exciting as it is to see your company grow and succeed, it can also be scary to make major financial decisions in light of that growth. After all, expanding your company often means introducing new risks — and new expenses — into your financial plan.New business ventures are often complex and may require you to take on new roles within your company. This can make it difficult to predict your personal income, expenses, and cash flow. That’s why it’s important to prepare for growth before taking the leap. Here are some common financial pitfalls to avoid when expanding your business:
New customers are exciting, but they don’t come cheap. Even if you’ve been getting a good response from customers, it can be tempting to cut costs and focus on bringing in new customers. However, the best way to truly succeed is to make sure your expansion efforts result in the highest return on investment possible. This means you must account for the cost of acquiring new customers (such as marketing expenses) and the revenue that new customers will bring in.While this may sound obvious, you might think that focusing only on new customers is a good strategy for growth. However, focusing on acquiring new customers and growing your customer base as quickly as possible will have a greater impact on your business. By keeping ROI in mind, you can make sure that your growth efforts stay focused on your long-term goals.
To make sure your company succeeds, you not only need to have a good idea — but also the financial resources to see it through. However, it’s easy to overlook the importance of budgeting when your business is just starting out. By setting aside time and resources each month to manage expenses and track your finances, you can make sure your company is on track for continued success.Unfortunately, many new businesses fail because they don’t have a budget in place. This can make it difficult to forecast expenses and plan for growth. That’s why it’s important to create a detailed budget before expanding your business.
As a new business owner, you may not think about tax implications when planning for expansion. After all, tax implications are often discussed in the context of long-term financial goals. However, tax implications are an important part of any financial decision. For example, it’s important to note that the tax rates for corporations and S corporations have changed significantly in recent years.By paying attention to tax implications, you can make sure that your financial decisions don’t leave you short on cash at a time when you need it most. For example, you might be tempted to give yourself a big raise when your company is experiencing success. However, this could result in higher taxes later on.
Inflation and market risk are two factors that are often overlooked when making financial decisions. For example, let’s say you’re thinking about expanding your business by hiring new employees. You might be tempted to hire based on what you think your current staff can handle. However, this could lead to unnecessary stress for your company.By thinking about these factors, you can make sure that your expansion efforts stay on track. For example, if you’re concerned about market risk, you can make contingency plans in case the market changes unexpectedly. Or, if you’re concerned about inflation, you can make sure that your salary increases are based on your current income.
Grow your business by taking these common financial pitfalls into account before making any major decisions. It’s important to focus on long-term financial goals when planning for expansion, but it’s also important to make sure you have the resources to see your company through to success.When your company begins to grow, it can be tempting to put your financial goals on the back burner. However, it’s important to focus on the big picture when expanding your business. It’s also important to make sure that you’re accounting for the cost of expansion (like new hiring and marketing costs).