Many kind people are willing to offer you – a business owner – financial advice, but you must think carefully before accepting it. Whether it's from your parents, neighbors, or someone you meet at the grocery store, anyone can offer advice. The important thing is that even if the advice is good, some advice can actually harm your business.
Below is a list of potentially harmful financial advice for businesses that you should think carefully about before implementing.
1. YOU MUST WRITE A TRADITIONAL BUSINESS PLAN
One of the elements of a traditional business plan is a financial forecast. But the truth is, no one knows what their business will be like in the next five years, let alone a newly established one. Instead of wasting time fabricating numbers and writing them into a plan that may or may not be accurate, it's better to spend your time developing a vision and making reasonable adjustments based on the business's growth. And if you need to write a plan to submit to a bank or investor, don't think you have to be a "slave" to it. Business is constantly changing and volatile, and you need to seize every opportunity.
2. YOU NEED TO RAISE FUNDING
Some people might advise you to seek investors for rapid growth. However, until you've found your own formula for making money, you're not ready to effectively utilize investor funds. Learn to generate profit before asking for money from others, especially for projects you don't even know how to execute. Don't fall into the trap of spending your time raising capital instead of making money.
3. NEVER GIVE UP
To become an entrepreneur, you certainly need a high level of determination. But there will be times when the best decision is to stop wasting money and energy on meaningless things. If you feel things are going wrong, change, fix, or even give up instead of clinging to the old plan that isn't yielding any results.
4. SPEND YOUR OWN MONEY
If you can't pay yourself a salary because you can't reinvest in the company, then you're essentially doing something pointless. If your company can't make enough money to cover its expenses, it shows you don't have a formula for making money, and of course, throwing your money at it isn't a good idea. Therefore, focus on running a profitable business from the start.
5. IMPORTANT FORMAT
Some people will insist that you need a prime location in the city and a stylish car to appear successful. But spending money on things your clients won't see is not a wise decision. Invest in a good location for your retail business rather than on exterior decor, and if you frequently drive to client meetings, then invest in a nice car. But remember not to squander money on things that don't directly impact your business profits.
6. INCREASING COSTS TO REDUCE TAXES
It's important to note that sometimes, buying office supplies at the end of the year to slightly reduce your profit margin is perfectly reasonable, as long as the purchase genuinely benefits your company. However, this becomes pointless when you spend money on frivolous items. It's absurd to spend millions just to save a few tens of thousands in taxes.
7. PROFIT COMES IN THE END
This is the most common belief, but it's actually completely wrong. We're always taught that revenue minus expenses equals profit, and that profit is what's left after accounting for everything important. This is completely wrong! Think about it! If you don't prioritize profit, you'll never make a profit. Always think about profit first, and manage expenses with the remaining money.
Good advice doesn't always cause harm, but sometimes it can lead to huge mistakes if you blindly follow it. Just because your friends want to see you succeed and are giving you advice doesn't mean they have the competence or experience to run a successful business. Trust selectively. And trust entrepreneurs who have faced similar challenges and see what lessons they've learned to overcome those difficulties.
Services offered by EXPERTIS:
