Financial mindsets that can damage your company

Do you know how to financially run your small business? Since almost half of all small businesses will fail in the first 5 years of operation, learning how to manage your small business finances is a key component you need to have in order to become successful.Why are so many businesses failing? There are a number of reasons why a small business may fail such as having insufficient capital, lack of financial control, poor planning, and bad management structure.

Poor financial control is often one of the biggest problems most small businesses see. How do you know if you have bad financial mindsets? There several to watch out for, here are a few you need to know about:

Having Fear
When a manager has fear because their sales aren't high enough or you feel that you are losing too much money on inventory, it can lead to a number of problems. Most of those problems include doing rapid discounts on your products as you feel it will bring in more revenue. Too many discounts means you will lose money because you are losing your markup value. Devaluing your product makes your customers lose their respect for it and when you try to markup the price in the future, they will refuse to pay it. The products that sit in your inventory are simply a waste so your best option is to start making products to order. This will help you to control your inventory so you aren't tying up your cash reserves. Never run your business finances with fear, it's one of the worst things you will ever do as you make poor decisions and they never end up benefiting the company in any way.

Desperation
Another poor financial mindset you may trap yourself into is having desperation. Managers that are desperate to sell products always end up failing. This usually causes you to take on too many projects for the company, which may lead to a number of problems as you are unable to handle all of the projects and rarely are you able to satisfy your customers. Desperation can be "smelled" by your customers as they will be able to see that you are in need of a sale so they will try and drop the price they are willing to pay. When you appear desperate, people will sense it and it often makes your business lose its credibility and it can hurt your reputation.

Too risky
A lot of businesses feel that they need to spend money to make money. This is true to an extent but when you start taking on too many risks for the company, you are going to struggle. Never gamble too much of the companies money away as it's going to come back to bite you.Investing money into large sales is a great way to make money, but it's also a big risk to your company if you aren't being careful. You need to make sure the customer is going to pay in a timely manner so you aren't stuck trying to pay for an order that you really cannot afford.

Being a manager is not an easy task and throwing in all the hard financial decisions you need to make will only make it more challenging. You need to look into different ways you can control your business without driving it into the ground. Watch out for the things that you know are going to pose too much risk to the company and avoid them altogether. Have another person help you with the financial decisions so you aren't trying to make them when you aren't in the right mindset.