Starting a business is a huge endeavor for any entrepreneur.
A newly-hatched entrepreneur is often motivated by a great idea and a strong desire to succeed. Nobody—and we mean nobody—should be under the impression that taking the entrepreneurial route is “easy.”
It can be exciting at times, sure. However, with each high come a few lows—and the lows are extra tough when you’re suffering them alone.
Entrepreneurs have a ton on their plate. From securing funding to paying taxes, and everything in between, there are tons of non-glamorous aspects of the hustle that don’t appear on Instagram stories or marketing websites. Many of the most crippling problems entrepreneurs face are financially-based. Whether because they were running with excitement or because they are not as financially-minded, entrepreneurs often come up against financial burdens that could be avoided—with the help of a certified professional accountant (CPA.)
We’ve teamed up with the American Institute of CPAs (AICPA) to profile the most common entrepreneurial mistakes—and how a CPA can help you avoid them before they happen!
- Pricing Your Products or Services Too High or Too Low
- Making Emotional Decisions
- Not Planning for Tax Obligations
- Not Setting a Clear Budget
PRICING YOUR PRODUCTS OR SERVICES TOO HIGH OR TOO LOW
Pricing your product or service can be tricky. Some entrepreneurs make the mistake of basing their price too close to the cost to produce—which results in abysmal margins. Other entrepreneurs “wing it” and price their products or services way too high. When determining a price for your products or services, you should enlist the help of a CPA. Pricing will rely on a variety of elements including:
- Production cost
- Geographic location
- Market demand
- Perceived value
CPAs can be very helpful in determining a healthy, margin-friendly price for your products and services. CPAs who specialize in market research can advise you on a variety of pricing options based on market segments, cost of marketing, perceived value, and—of course—the price tag that will give you realistic returns.
MAKING EMOTIONAL DECISIONS
The entrepreneurial lifestyle can be challenging in many ways. One of the biggest personal challenges is just that—it’s personal. When an entrepreneur is reliant on herself, the buck stops with her. That also means that any problems, roadblocks, or mistakes will likely manifest as a personal affront.
Not all emotional decision-making is bad, but it’s important to balance emotion with knowledge and information. How, as an entrepreneur, can you safeguard against emotions that are sure to arise? This is, after all, your business and your livelihood. To safeguard against making damaging emotional decisions in the future—maybe in the face of a particularly challenging quarter—you’ll want to enlist the help of a CPA to complete some financial forecasting. Proper planning is the key to any company’s success—and financial forecasting is a great way to arm you with the enemy of emotion, data.
We recommend financial forecasting help as one of the very first steps in setting up your business or entrepreneurial side hustle—before any emotional decisions are even on the horizon. By starting off with a financial forecast for your entrepreneurial business, you’ll have identified (with the help of a CPA) balance sheets, statements of income and cash flow, sustainable growth methods, and fund requirements for success. In short. You’ll have hard numbers and real data. While data doesn’t always win over emotions, it provides an entrepreneur with a more complete set of tools to make a smart decision—one that involves a combination of raw data and gut instinct.
NOT PLANNING FOR TAX OBLIGATIONS
No matter who you are, taxes are coming for you—every year.
Entrepreneurs are certainly no exception to this rule. Yet, one of the biggest mistakes entrepreneurs make is not planning for tax expenditures. An unexpected tax responsibility can break a new business by completely wiping out any of its cash flow. Tax-based mistakes can manifest in a few different ways for an entrepreneur.
Just like we hit on the last section, planning will be your best friend when anticipating taxes. Work with a qualified expert in order to ensure you are taking the wisest steps when it comes to taxes. Use The American Institute of Certified Public Accountants (AICPA) Find-A-CPA map to connect with a local CPA. Your CPA will be the most important ally in getting your business off to a great start. Once you have enlisted the help of a CPA, you can work together to choose the correct entity structure for your business (S corporation, partnerships, or LLCs are common options.) Each of these structures will have different tax obligations, so work with a CPA to choose the right one for you—and be prepared for what you will owe.It doesn’t stop there. A CPA will also help you to keep accurate books and records of your business, which will have you prepared for tax season, deductions, and even an audit.
NOT SETTING A CLEAR BUDGET FOR YOUR BUSINESS
One of the most important responsibilities an entrepreneur juggles is generating capital for the business. Once capital is acquired (congrats!) the job is far from over. Your business is only going to be as successful as your budgeting allows. Whether operating with a huge influx of capital or with a small amount of startup money, budgeting will be crucial to maintaining a successful business. Many capital-rich entrepreneurs run into problems with over-spending on hires, fancy office space, “big” purchases, and other exciting expenditures. Before they know it, the seemingly endless flow of money is close to gone.
Work with a CPA to set a monthly budget from the beginning. This initial budget will take into account things like labor, materials, startup costs, and expected revenue. If an entrepreneur is fortunate to receive an unexpected influx of capital, it’s wise to loop your CPA to rework your budget. This re-budgeting will safeguard against making mistake #2, emotional decisions. As an entrepreneur, enlisting the help of a CPA will put your mind at ease.
Focus your energy and brainpower on your business and use AICPA’s Find-a-CPA map to enlist the help of an expert CPA near you.