The 9 Money Mistakes Millennial Entrepreneurs Make That Destroy Their Businesses


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As a young, millennial entrepreneur who is inexperienced in the ways of managing and growing a business, one of the biggest challenges involves managing money and making smart financial decisions. In fact, it’s the mistakes and errors made in this area that come back to hurt entrepreneurs for years to come.

The 9 Costly Money Mistakes Millennial Entrepreneurs Make That You Should Avoid

As a business owner, you probably pour a lot of your energy into things like sales, marketing, growth, and management. However, you can’t afford to ignore financial literacy.

“A financially literate business owner is more likely to be fully in control of their business,” ACCA-X points out. “Gaining an understanding of what balance sheets and profit and loss statements mean provides a clear view of the financial state of your enterprise and subsequently facilitates smarter business decisions.”

Financial literacy isn’t something you can pick up from a case study in a business school textbook. It’s something that takes years of cultivation and firsthand experience. But if you want to accelerate the learning curve and give your business the best chance of being successful and sustainable, you’ll want to avoid making costly mistakes that frequently set other entrepreneurs and businesses back.

Mistakes are part of the learning process, but here are nine mistakes you’re better off not making.

  1. Failing to Improve Bad Personal Credit

While you have to learn how to separate your personal financial situation from your business finances (more on that in the next section), there’s one personal issue that can impact the financial standing of your business ventures: your credit score. For your reference, here are the numerical ranges for credit scores and how creditors view them:

  • Excellent: 750 and above
  • Good: 700 to 749
  • Fair: 650 to 699
  • Poor: 550 to 649
  • Bad: 550 and below

Your credit score shouldn’t falls below 649. This indicates there are some negative strikes against you on your credit report. If it hasn’t already impacted your ability to get credit, it probably will in the future.

The biggest mistake you can make on this front is to assume that everything is going to be fine. If you aren’t careful, this mentality will come back to bite you when you try to secure a loan for your startup or small business. The best thing you can do is repair your credit – with a reliable company – as soon as possible.

  1. Commingling Personal and Business Expenses

Your personal credit score will be used to gauge your business’ creditworthiness in the beginning, that’s where it stops. If you don’t draw a fine line between your personal and businesses expenses, you’ll end up commingling funds and creating a convoluted mess that will:

  • (a) give you a headache
  • (b) put you at risk if the IRS ever chooses to audit the business

The best piece of advice is to create separate bank accounts – one for your personal finances and another for your business finances. Only personal expenses should be paid out of your personal account, while business expenses should be tied to your business account. The same goes for revenue.

“Even if you receive a business check that you plan on using entirely to pay yourself, you should still deposit it into your business accounts before writing yourself a check,” attorney George Khoury advises. “This will ensure that a clear ‘paper-trial’ is created. Failing to keep separate accounts will require un-mingling funds, which is a complicated, and time consuming process.”

  1. Tax Avoidance

There’s nothing wrong with trying to reduce your company’s tax bill. In fact, you should probably be pouring considerable resources into tax preparation in an effort to save money and set your business up for success. But there’s a difference between reducing your tax burden using exemptions and other legal techniques and avoiding taxes that you rightfully owe. Negligence is one thing – fraud is another.

If you’re doing things like overstating deductions and expenses, falsifying documents, concealing the transfer of income, keeping multiple sets of financial ledgers, falsifying expenses, or willfully underreporting income, you’re committing fraud in the eyes of the IRS. This is a criminal offense and could lead to steep fines and/or jail time.

  1. Scaling Too Quickly

Entrepreneurs are inundated with the idea that they need to scale as quickly as possible in order to build a wildly profitable business that can eventually be sold for a large sum of money. While there’s nothing wrong with this approach, premature scaling is dangerous and will ultimately compromise the integrity of the business operation.

There’s something to be said for taking your time and moving at the correct speed. It doesn’t matter if your closest competitor is quickly moving in one direction. You need the discipline and wherewithal to recognize the specific circumstances and constraints you face. What you’ll most likely see is that scaling is a highly personal thing that must be dealt with independent of external pressures.

  1. Not Gaining Control Over Cash Flow

Do you know what sinks startups and small businesses more often than not? A lack of proper cash flow management. In fact, research from the Association of Chartered Certified Accountants shows that 82 percent of businesses fail due to cash flow issues.

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The problem is that most millennial entrepreneurs aren’t financially savvy. They haven’t been raised with the same knowledge on the topic as previous generations. This makes cash flow management a serious liability in many cases.

There are entire books, seminars, courses, and certifications on cash flow management – so we’re not even going to attempt to touch the subject here – but just recognize that this is a major issue that can systematically dismantle your business if not given the proper attention and focus.

  1. Fundraising Too Quickly

Funding your business is critical when you’re short on financial resources and need money to grow. However, it’s a mistake to spend all of your time focusing on raising funds from investors and venture capitalists.

The first issue has to do with your time. If all of your energy is being poured into pitching investors and putting together financial reports, you’re not doing anything to actively grow the business. Things like marketing, product development, and customer service are being put on the backburner. Clearly, this isn’t good.

The second issue deals with power and authority. The more investors you bring on board, the more your ownership is diluted and the more people you have to appease. This limits your independence and slows down decision-making and execution.

  1. Focusing on the Topline (Instead of the Bottom Line)

Top line numbers are big, loud, and sexy. Entrepreneurs often tout these numbers as a way of lauding their own efforts and projecting success to peers. That being said they’re essentially useless. After all, does it really mean much if your top line sales number is $2 million, but your bottom line profit is $20,000? It might sound good on paper, but it’s a huge mistake to focus on the top line.

“Every dollar that you create and protect as bottom line profit is much more valuable to your business and to you as an owner than the revenue dollar you create at the top,” entrepreneur Garrett Gunderson notes. “Can you streamline processes? Save on inventory? Save on taxes? These are the more valuable questions you should be asking yourself. But most business owners and operators don’t, or at least they don’t do so with sufficient accuracy and skill.”

  1. Not Surrounding Yourself With the Right People

Young entrepreneurs often have this mentality that it’s more respectable to do everything on their own. They see help and support as signs of weakness and trust only in themselves. Sadly, nothing could be further from the truth.

As a young entrepreneur – or any entrepreneur, for that matter – it’s imperative that you surround yourself with people who can shape, mold, and lead you. This is especially true on the financial front, where support and advice are invaluable. At the very least, you need access to experienced business owners, an accountant, a tax specialist, and a financial advisor.

  1. Improperly Compensating Yourself

Finally, let’s highlight the issue of improper compensation. Many young entrepreneurs don’t understand this topic. They end up ruining their businesses because they either take too little in salary or too much.

First off, you need to take enough to pay your bills and make ends meet at home. There’s nothing noble about forgoing a salary and going hungry. On the opposite end of the spectrum, you don’t want to take so much that you’re straining the business, or that lenders and investors raise their eyebrows. A moderate salary that’s in alignment with industry averages is a good place to start. As the business grows, so will your salary.

Cultivate Your Financial Acumen

Clearly, there’s a lot that goes into being a financially literate entrepreneur. You need to understand the ins and outs of managing and scaling a business. It’s impossible to circumvent the learning curve. You can, however, save yourself (and your business) a lot of frustration by avoiding the common money mistakes highlighted in this article.

The more you cultivate your financial acumen, the more successful you’ll be in the long run.



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