Running a small business can come with bumps and bruises, but there’s no reason you can’t heal from them. Kabbage asked small business owners their worst financial mistake and how they rectified it. Hopefully, they’re experiences can provide insight to avoiding financial mishaps in your own small business.
What was your worst financial mistake and how did you rectify it?
“The biggest financial mistake we have ever made is not setting aside emergency funds. There will always be cycles of boom and bust regardless of how good your business is or what industry you’re in; that’s just the nature of that game. We rectified it by offering deep discounts on our shoes to increase sales and liquidated unused and old inventory.” – Rachel Baileys, The Scarpetta
“The biggest mistake I made when starting my business was trying to do everything myself. Looking back, this approach slowed the overall growth of the business. I had to acknowledge I needed help. Only when I started to delegate tasks and assign project managers were we able to scale up.” – Brad Shaw, Dallas Web Design, Inc.
“We made some real financial mistakes with our AdWords spend in our early days as a company. … We didn’t utilize our match types and negative keywords effectively and, as a result, lost a lot of money on that platform through irrelevant clicks. We fixed this by really learning, in depth, how the platform worked. Since then we’ve enjoyed a consistent ROI from Ad words. AdWords can really be a killer if you don’t understand it!” – Tim Grinsdale, TOAD Diaries
“My worst financial mistake was covering a large up front order for a big client overseas. They took 90 days to pay after agreeing to pay in one week. I probably sent a few hundred emails and threatened legal action before the French company paid.” – David Lowe, Qwerky
“I learned the hard way you have to budget to manage your cash flow and what gets most small businesses in trouble is not proactively managing their cash flow.” – Bryan Clayton, GreenPal
“Biggest mistake was waiting too long to switch a higher-level accountant (versus just a good bookkeeper) who could provide real actionable data and decision making support by learning our business. We felt like moving to a higher cost accountant/controller would be too expensive, but we rectified the situation by realizing that the money we spent on paying for better accounting advice would allow us to better manage cash flow, including lines of credit, such as Kabbage (of which we are a customer.)” – Coby Pachmayr, Idea Spring
“As a small business owner, the biggest financial mistake I’ve made is focusing on growing my company’s total sales and customer base instead on what truly matters, which is the company’s bottom line. I got so caught up in creating content and growing my site’s traffic, that I neglected to spend the necessary time required to optimize some of the other areas of my business such as customer retention and employee staffing, both of which was costing our company a lot of money on a per-customer basis. A huge contributing factor to why I made the mistake I did was because I wanted to do everything myself. I had a ‘do it yourself’ mentality, and this actually slowed the growth of my business. I was finally able to solve some of the internal problems within the company by outsourcing a lot of what I did to other employees and freelancers. That way, I had more time to focus on big picture stuff, that only I, as the owner of the business, could do.” – Peter Yang, ResumeGo
“My worst financial mistake was that I didn’t analyze the financial parameters enough for several first years of my business. I just checked an income and main costs. However, it’s obvious that every owner must list and analyze all KPIs. … The remedy is pretty simple. You just need to write down all the numbers on a daily basis. You can use any specialized software or just make a table in Excel – doesn’t matter, but do this every single day. … First, I recorded everything by myself. It took a long time but was necessary. Then I asked my employees that were in charge for different areas (sales, production, advertising, etc.) to fill in the small shared tables, also on an everyday basis. … And you know what? In several months, the company somehow became profitable. We just saw many small holes by which our money leaked and ‘closed’ them.” – Veniamin Bakalinskiy, iTrex Language Services
“Our worst financial mistake in our history was to hire more employees than we could afford. It sounds like a very basic error, but it is not. … How do we solve it? With absolute sincerity. We met the entire company and explained that there were two options: Either we dismissed part of the team, or eventually the company will be bankrupt, and we were all going to be out of work. … The result? With a lot of effort, everything in the end came out well, and most of the people we fired, then we were able to hire them again months later.” – Cristian Rennella, oMelhorTrato
“The worst financial mistake my cofounder and I made at InvestmentZen is overspending when the company was first founded. … We wanted to grow quickly, so we purchased a lot of various tools and software that we didn’t use and/or didn’t contribute to driving traffic/revenue. That ended up forcing us to put more of our own money into the business to keep it afloat until it started to generate revenue, so we were lucky that we had some savings set aside. Had we not, we would have either had to take a loan, get investors or shut down the operation after spending five figures and 6 months on it, which would not have been fun. Once we had to put our own money in, that was the wakeup call we needed to institute a bit more discipline in the buying process and try to tie every dollar spent into some tangible ROI down the road. We also set up a monthly budget that was super helpful, which had the side effect of making us wait to see the results of an experiment and taking those learnings into account before trying the next growth strategy.” – Han Chang, InvestmentZen
“As a small business owner, you may find yourself doing much of the work yourself, ending up exhausted and ready to throw in the towel. You spread yourself too thin, finishing your work but not creating the best possible outcome. … Of course, you have talent or you would not be an entrepreneur, but focus on your two best talents and hire or find business partners that exceed where you are weakest, and let them handle those areas of the business. … Identify your mistakes. Are you taking on tasks that are not necessarily your strength when you could pass them on to somebody who is better at it? If so, learn to pass the baton to the proper person. Even if that means hiring extra professionals, in the end you will find the investment well worth it.” – Nick Sawinyh, Seomator