"Many successful entrepreneurs are consumed by the business is being done so that some neglected their personal financial priorities," said Eric Johnson, senior strategist at the Signature client, a wealth management firm based in Norfolk, Virginia, United States.
According to him, there are six common financial management mistakes made young entrepreneur. You need to know in order to find strategies to avoid it.
1. "Over"-investment
Baseball fun, dong, that the business in the field of lifestyle, but renting an office or business space in the shop? Perhaps you just think so. In order to impress a professional, there are many young entrepreneurs who are willing to dig his savings, for example to rent offices in a hip or buy fancy equipment or furniture. However, spending too much for expenses that are not important-very important to scrape your personal finances quickly, you know.
Alexa von Tobel, founder and CEO LearnVest.com, say, capital or savings could run out before you had time to produce goods or services for sale. "Use any money you have to create a good product, and show to the user. If your product is not good, there is no hope for progress," he said.
2. Do not pay themselves
Young business owners tend to invest all resources into the business without spending a single penny. Difficult if the business should pay for your personal life. Like other employees, provide adequate salaries for your own personal finances to ensure you stay healthy and separate from the business. However, do not just because you are a business owner is then given a high salary for you. You must provide enough funding for your business in order to remain able to operate in difficult times.
3. Not considering the worst possible
Young people often think that their great potential and can not fail. However, anyone can fail, and you need to make plans after predicting the worst. Create a replacement plan and some form of insurance to support the business when you are unable to run it. If you have a partner and your business is not easy to sell, Eric Johnson suggested creating a buy-sell agreement. The agreement sets out what happens when one business owner dies, and usually includes a component that provides the insurance fund at any time if anything happens to business owners.
4. Mixing business and personal assets
Whether it's personally guarantee the loan or ask your parents to buy a second home, increase personal assets for business purposes will not be good for personal financial condition. Why is that? Imagine, when your business is declining, the creditor may pursue your personal assets.
"You should only use the guarantee of the business. So, when your business is down, you are not personally liable on the loan," said Lynn Mayabb, senior managing advisor BKD Wealth Advisors in Kansas City.
5. Using personal credit cards for business purposes
It would be very risky if you rely on personal credit cards to finance the business when the bank is not willing to provide funds for you. You might be tempted to charge things that should not be on a personal credit card. Mixing business and private bills can cause organizational chaos. If your business is audited, you should certainly provide a record of business spending at least three years back. Can you provide it? Surely not. So, you should create a special credit card for business affairs, and only used for necessary business expense.
6. "Robbing" the company's cash
When doing a great sales success in two or three months, the young entrepreneur will usually be too confident, so according Mayabb. Inexperienced entrepreneurs will then begin to spend corporate cash flow indiscriminately. Take for example, when the operational need a car, they will buy the best cars (in the sense of the best brands and prices are more expensive), then realized that in the next few months there was no significant sales.
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