8 Money Mistakes Entrepreneurs Make When They Start Tasting a Little Success
I know what you’re thinking – if you’ve struck success, then shouldn’t you be free to do pretty much whatever you want? After all, you’ve put in the hard work. You’ve built your net worth. You’ve scrimped and saved and struggled and burned the candle at both ends for a long time now. Shouldn’t you be rewarded for all that effort?
Sure, you should. That’s not the problem. The real issue here is thinking that your work is done. Achieving a little bit of success isn’t the end game. Being successful for the long term is the goal, and you can’t do that if you lose your mind the second you get a tiny taste of victory.
So, yes, reward yourself. Cut loose a little bit. Get a tiny bit wild. Then get back to the hustle. If not, you could fall victim to any of these money mistakes and their success-derailing powers.
Celebrating the Wrong Way
We’re going to start our discussion with what might be the most obvious mistake on the list – celebrating the wrong way. This could be a cessation of your investment actions. You think that you’ve “made it”, so why should you keep socking money away into those accounts and options? It could be celebrating your success with the wrong folks – the jealous ones, the bitter ones, the envious ones.
Instead, don’t stop any of the activities that have helped you get this far. And, if you’re going to throw a party, make sure that you celebrate with those who are truly happy for your success and who might have helped you get there in the first place. Avoid those who just want a piece of what you’re building, or those who might want to tear it down.
Not Keeping Your Personal and Business Accounts Separate
Yeah, I get it. You’re running a startup. Your business doesn’t have a lot of cash of its own. It’s just easier to mix everything together. If you’re operating a sole-proprietorship, and I really hope that you’re not, then that’s fine. Your personal and business finances will be taxed together anyway. However, if you’re running any other type of business, then your personal and business finances need to be completely separate. You will need to make sure that your business has:
Its own checking account
Its own credit card(s)
Mixing personal and business accounts can also have very serious consequences in the eyes of the IRS that go well beyond just increasing your tax burden. There’s the very real chance that you’ll be slapped with charges related to the misappropriation or misuse of funds. Keep everything separate and make sure that your books are scrupulous, even if you need to hire a professional to do that for you. Speaking of hiring, that brings us to another mistake.
Hiring Before You Should
Again, it’s understandable. You’ve worked your tail end off for a long time now. It seems like it’s the appropriate moment to bring other people aboard. You could really use the help, whether that’s administering the business or running the store itself. However, the issue is that bringing on others is never as simple as it seems.
Hiring your first employee entails more than just paying them an hourly wage, and your administrative burden rises exponentially. Every employee you hire will require workers’ compensation insurance, paid time off, and more. You’ll also need to deal with payroll taxes, Social Security and other contributions, and a great deal more. If you’ve got the income (and the time), there’s nothing more rewarding than growing your team. However, don’t jump the gun here.
Not Spending Enough Money
We’ve touched on spending money too soon or spending too much, but there’s also the possibility that you won’t spend enough. That’s just as damaging as overspending. You need to feed your business in order to keep it moving forward. Where do you need to spend more money? It could be almost anywhere. However, most of your expenses will come from increasing your sales and marketing activities.
If you want to really dominate the game, then you need to get the word out and close the deal with new clients, customers, or prospects. You need to spend as much as necessary in order to build the architecture you need for growth and profitability. You need the right systems in place to ensure you’re able to reach your audience, engage with them, and then track and monitor your efforts over time. Earning money is not enough. You also need to spend it in support of your business success.
Not Investing in Your Own Future
Sure, your business is fueling your personal success right now. If you’ve reached the break-even point, chances are good that you’ve tapped into that income to pay off debts, to invest in a new home, to buy a new car, or otherwise improve your personal situation. That’s fine, but don’t go too crazy. As I’ve mentioned in several posts, real success is more about your total net worth than it is how much you pull in per year, or how nice your car is. So, don’t forget to take steps to maximize your net worth over time.
What I’m talking about here is investing in your own future with stocks, bonds, IRA accounts, 401(k) accounts and the like. No, it’s not sexy. It’s not exciting, either, unless you like tracking individual account performance over time, and I really don’t recommend watching daily changes, as that gets boring quickly. However, it is essential. It’s also important that you get started as soon as you possibly can.
By investing early, you can take advantage of compounding interest as soon as possible. That is, the interest your investments earn will begin earning interest, and then that interest will generate interest. It’s a cumulative effect, and the only sure way to really build that nest egg that you’re going to need down the road.
Not Continuing to Plug Away
When they taste that initial bit of success, a lot of entrepreneurs believe that they’re done. They call it quits. They feel as though, now that the business is earning money, they can finally stop.
That’s not the case. You can never stop. When you quit, your income does, too.
Realize that now. I want you to breathe it in. Absorb it. Cement it in your brain. When you quit trying, your income quits flowing. It’s as simple as that. If you quit, it stops. If you cut back, your income cuts back. There’s a direct correlation between your income-generating activities and the money that flows into your bank account.
If you choose to step back, make sure you’re prepared for the inevitable decline in your financial health.
Living above Your Means
This mistake touches on the same mentality that we’ve already discussed here, plus in several other posts. That is, too many people assume that lifestyle equates with success. They see success as being able to buy flashy cars. They believe success means buying massive McMansions. They think that successful people travel to luxury resorts constantly, and that they’re always partying with beautiful people.
Yes, successful people can afford those things, but they generally don’t buy them or involve themselves with them. Why? Simply put, if they did, then they would lose the money that makes them successful in the first place. Take a look at those who are shelling out that kind of cash, and chances are good that you’ll see they’re living well above their means and will most likely be facing bankruptcy in the future.
Investing in a Business Location
Let me put this as clearly as I can. Unless you’re selling a physical product (or products) in a local area, then there is zero reason for you to invest in a business location. Renting business premises is an immense cost, and there’s really no reason why you should bother. In most cases, you can run your startup out of your home. There are tons of ways that you can stay in communication with and serve your clients without having to shell out cash for a business location. The only exception to this rule is if you’re operating a local business and your customers need to visit a brick and mortar location.
If you’re trying to save cash for your business, opting out of the commercial real estate game is a great place to start. Take a long, hard look at your business and chances are good that you’ll agree there is little point in paying for premises.
These are just a few of the major mistakes that entrepreneurs can make when they get a taste of success. There are plenty of other missteps that can derail your success quickly and often permanently. Worried that you’ll fall prey to these or other mistakes? Sign up for my Six Figure Sunday course and learn what you need to know in order to earn six figures per year with only a day of work per week. Simply CLICK HERE to watch the free training video.