Here is Part 2 of the 5 Most Common Cash-Flow Mistakes that Small-Business Owners make…Engaging in impulse spending during the startup phase

2. Engaging in impulse spending during the startup phase

“It takes money to make money”: We hear this saying so often in business, and in many ways it is true.

But, unfortunately, this common belief can make many a rookie entrepreneur fall prey to gross overspending — especially in the first few months of business.

The reality is that while, yes, it does take money to make money, not all startup expenses are created equal. Starting a business involves plenty of clearly beneficial expenses — costs that will benefit your company’s profitability in measurable ways. But there are also plenty of consultants, advisors and B2B service providers who would be happy to take your startup’s capital for things you don’t actually need.

If you want your business to make money, then, keep your eye on the bottom line, considering the cost-benefit of every single expense. After all, every dollar you spend on your business is a dollar that is ultimately taken away from your profit margin.

Along with your revenue forecast, create a realistic budget, and stick to it. Calculate when you plan for your business to break even — and as unexpected expenses or opportunities for impulse spending come up, go back to your projections and calculate how those purchases will delay your break-even point. You may decide that your employees don’t need that ping pong table after all.

 

This snippet is thanks to entrepreneur.com: https://www.entrepreneur.com/article/249020, and written by Jared Hecht