It helps to avoid costly mistakes when starting or running your own business. There are many common mistakes that newcomers make, and it is a learning process. From charging the right amount of money to using the right insurance policies, here are 5 common mistakes to watch out for.
By Team Savant
Image: Sincerely Media
Don’t Ignore Your Taxes
Taxes. A four-letter word to some people. But it is necessary if you want to stay out of trouble. As a business owner, whether you are a sole trader or part of a limited company, you must understand taxes because the tax office always needs feeding. For example, as a roofing engineer with your own small business, you are just as liable for taxes as a corporation with 10,000 employees. But as one person, you don’t have the luxury of an accounting department.
Keep Pricing Rates Competitive
It can be tempting to undercharge for services when starting out as you want to attract customers. But this would be a critical mistake that will cost now and later. Undercharging means you will not be recouping expenses, even though customers will love it, for now. But it also means you will have to increase prices by a substantial amount because it isn’t sustainable. Doing this is a good way to lose customers who don’t want to pay the steep hike.
Avoid Costly Mistakes with Accurate Records
Records are vital to a business and are nothing to be afraid of as you aren’t doing anything like Madoff or Enron. Being self-employed means this is more vital than ever for issues such as taxes, customer data and accounts, and you may have to do all this yourself. Around 70% of SMBs don’t have specialists such as an accountant. But there are solutions. For example, apps like Quickbooks are a massive help with accounts, and you can always outsource services.
Identify the Insurance You Will Need
A bit like taxes, insurance is necessary, even if self-employed. Maybe more so. Business disruption insurance is a big help because you don’t get paid even while off work when self-employed. But you will also need employer’s liability insurance if you have even a single employee working for you. It would be best to speak to an insurance advisor about what you will need, as all businesses are different. Just make sure you don’t get sold unnecessary services.
Keep Personal and Business Money Separate
One of the worst mistakes you can make is using the same account for your personal income for business transactions. At the least, it makes it difficult to identify business transactions when you need to go over account records or provide evidence for tax purposes. It’s just more work. But it also makes it a lot easier and tempting to use business funds for personal expenses. With a mixed account, there are many legal challenges you will face when things inevitably go wrong.
Summary
Understanding taxes is just one powerful way to avoid costly mistakes when self-employed. Keeping records of transactions and customers will also help for various reasons. Keeping business and personal transactions in separate accounts will reduce confusion and issues.