If You’re An Entrepreneur, You Need to Know These 5 Money Myths

Are you experiencing financial troubles in your business lately? Well, you are not the only one. A lot of companies, particularly start-ups, find that handling their finances is trickier than they expected. Their budgets don’t work–if they have one at all–and there’s never enough money to keep operations going without some kind of compromise.

If you’re tired of facing problem after problem with regard to your business finances, then it’s worth checking whether they’re a result of misinformation. There are several money myths that a lot of entrepreneurs today still believe, it’s creating chaos in their companies before they even get a chance to properly launch.

To make sure this isn’t the root of your problems, here are five of the most common myths you have to be aware of:

Myth 1: Decide on a Capital and Make It Work

Your capital is essential to your success. The problem is that not all entrepreneurs launch their businesses with the right amount in their bank accounts. They believe that they can just decide on any huge sum or make an estimate, and the rest is about making it work. Whatever is lacking can be covered by the initial sales you make. Regardless if you’re starting a quaint cafe in the city or picking up a chicken franchise that’s popular in your neighborhood, it’s important that you understand how to compute for a capital.

You must first begin with a business plan, followed by a calculation of your product development cost, launch cost, and operating costs. Remember to keep the last two separate, as it is an entirely different thing to kick off your business and to keep it going. If you’re going to franchise a brand, make sure that you know not only the total sum, but also where the money is going after you make the purchase.

Myth 2: No Money Means You Need More Sales

It’s easy to assume that running out of money is a direct result of insufficient sales. After all, if you’re really making enough money, then you wouldn’t be experiencing any shortage, right? The sad truth is that this isn’t always the case. It might be a factor worth considering, but before you jump to that conclusion, you have to do something else first.

Check your bookkeeping and review your budget. It could be that you’re spending on unnecessary things, persisting with marketing strategies that don’t work, or failing to keep your operation costs under control. The sales you make monthly might actually be enough to cover everything if only you stick to a budget.

Myth 3: Your Competitors Determine Your Pricing

Many entrepreneurs create their price list┬ábased on that of their competitors. This is how you manage to stay competitive and entice customers to switch to your brand instead, right? There’s nothing wrong with doing market research and monitoring their prices, but how you determine your rates shouldn’t be based on this information.

You actually need to make calculations that involve how much you spend on each product and how much your company needs in terms of revenue. Keep in mind that the quality of your goods might be higher or lesser than your competitor’s. If it’s higher, then matching their rates will mean losses for your business. If it’s lower, then people won’t want to buy your products.

Myth 4: You Can Stick with the Same Budget for Years

Budgeting is a regular task, not a one-time job. You have to sit with the essential people in your team and come up with budgeting plans that will get your finances in order. Any time your budget doesn’t work, you have to schedule a meeting and determine where you’re going wrong.

While this involves a lot of work and heavy thinking, you can be sure that it’ll pay off. Regularly assessing your budget and tweaking it can help you make the most of your finances and even prepare you for a growth spurt.

Myth 5: When the Sales are Great, You Can Pay Yourself More

It’s a nice thought, especially if you’ve been working harder than everybody else to keep your business afloat. The sad reality is that increasing your personal earnings isn’t a simple matter, even if you’re just a start-up. You can’t just decide to keep half of your entire revenue with every breakthrough sale that you achieve.

You need to put your business’s needs first and make calculations before you give yourself a bonus. And make sure that you put that on record, because you don’t want your bookkeeper wondering whether your business just got stolen from.

The best way to keep from falling for myths is to educate yourself about business finances. Never stop learning, and get involved in your bookkeeping at every stage of your growth. This will protect your company from terrible consequences that could’ve been prevented if only you knew you were abiding by a myth.

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