The first advice that experienced entrepreneurs give to new business founder is: Don’t run out of money. While this might seem like an obvious thing to say, it remains nevertheless accurate. Indeed, many businesses find themselves facing bankruptcy, even though they were recording profits. Indeed, the crucial element to keep your business afloat is to monitor not only your P&L – profit and loss statement – but also your cash flow. Too many enthusiastic first-time entrepreneurs fail to track their cash flows and discover too late that their business has become undercapitalized. To put it clearly, it means that you don’t have sufficient funds to operate. When your cash flow hits an extended negative period, you have no other solution than to go out of business. The problem with cash flow is that your business is likely to spend more money than you can afford, especially if you’re not careful about your strategy. Don’t assume that entrepreneurs dry out their cash flows as a result of an opulent behavior. On the contrary, their mistakes are not caused by exuberance but by a tendency to overcare.

Start with an Honest Business Plan

You can’t launch your entrepreneurship adventure without a solid business plan. For a lot of newcomers to the business market, writing a plan is a complicated exercise that requires strategic thinking and a lot of research. Indeed, your business idea isn’t going to become a hit on the market overnight. You need to create a plan that will act as a compass to guide you through the various steps of turning your idea into a profitable product or service. At the heart of your business plan, you need to clear understanding of your competition and your audience. The only way to make sure that what you provide is going to be appealing to your target customers and suitable for your niche is by knowing what the market is made of. Defining your business structure and the basic strategy to reach your goals are your top priorities. As a result, many entrepreneurs find it difficult to determine their financial plan and projected gains – as they expect their business strategy to generate income. In reality, failure to limit how much you need and how much financing is available can affect your ability to follow the strategy.

Are You Wasting Money on IT Security?

Nobody is denying that keeping your IT system secure is vital for your business. You can’t establish your company as a trustworthy and reliable partner if you fail to include professional IT management and security. Nobody wants to discover that their confidential data have been exposed through a company data breach! However, as much as IT security matters, you are likely to spend too much on the issue. Indeed, small businesses don’t have the budget to run a team of experts and invest in the latest gadgets. A solution such as ISLA provides a cost-effective alternative that uses an isolation platform where the incoming code is isolated and neutralized. Indeed, focusing your budget on an IT team forces you to fix existing problems instead of identifying them before they occur.

Every Dollar You Spend in Google AdWords

There is a saying about Google AdWords that claims that for every dollar you spend, you can double the amount in return. Google AdWords is a favorite for small businesses because it allows them to manage their expenses and choose precisely how much they want to invest in their digital marketing campaigns. With these features, AdWords makes its services suitable for every business, regardless of their budgeting potential. Except, and that’s a big problem, if you waste your advertising budget through costly mistakes. In that case, every dollar you spend on Google AdWords campaigns is a lost dollar, and that’s not something a new business can survive.

Are You Wasting Money on Your Staff?

Lastly, every company understands how important their employees are. They are, after all, your biggest asset. Therefore, it comes as no surprise that the most successful strategy when it comes to managing your team is to invest in your staff. But that doesn’t mean that every investment is a good idea. Too many small businesses pick perks in an effort to keep their staff satisfied. The truth is that you need to choose carefully. For instance, introducing relaxing elements such as a ping-pong table can reduce stress levels; however, if you also introduce a strict policy of use, you are likely to create the opposite effect. Similarly, unnecessary perks, such as free beer Friday, do nothing to improve your staff work environment.

In conclusion, business owners fall into the trap of overspending often try to do the right thing, both in terms of strategic thinking and for their employees. However, failure to perceive the full implication of their optimistic decisions can dramatically affect their cash flow. The secret to reducing overspending is to always plan for the worst-case scenario.