Ask any business owner, and they'll tell you. One of the best ways to gain knowledge and skills is by making big, fat, whopping mistakes. Lessons learned are what make us stronger, smarter and resilient.
However, there are some goof-ups that do more than teach a lesson. They can kill a business. Luckily, every one of them can be avoided. As Dave teaches in EntreLeadership Master Series, there are several ways to bulletproof your business and find financial peace at the same time. Here are few of the preventative measures every business owner needs to take.
1. Do the Accounting
At heart, we're all brave warriors who work long hours, fight the competition, and make any sacrifice to succeed. That is ... until it comes to accounting. Then, most of us would rather have a tooth drilled without Novocain.
Unfortunately, it's about the biggest business mistake you can make. As the Bible says, "Be diligent to know the state of your flocks and attend to your herds." (Proverbs 27:23 NKJV)
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Dave, too, dislikes accounting. But he loves the control and awareness it gives him. "I don't care how much you hate diving into the numbers, business owners who don't stay on top of their accounting fail and close up shop."
2. Pay Your Taxes
If there is anyone, and we mean anyone, you do not want to mess with, it's the tax man. He will always get paid, even when you don't. You should have a monthly tax-savings account, where you can set aside 25% of your profits to pay your quarterly IRS estimates. Treat the money in that account as untouchable. The same holds true for payroll/sales taxes. Don't borrow from them to operate, because you'll never catch up. Add severe penalties and interest, and you can count yourself gone.
3. Avoid the Toys
Once your company begins making a decent profit, it's easy to fall into the trap of needing the latest gadget or electronic gizmo—all in the name of increased productivity, profit or client approval.
The most successful businesses don't buy nicer things and toys without surplus funds. They never go into debt for them. "No deal was every made or lost based on the couch in the reception area," Dave says. "That is ego."
4. Make Cash King
Anyone who has listened to Dave for more than two seconds on the radio knows he is the number-one enemy of debt. But that's just for home, right? Actually, no. Dave believes that businesses can operate successfully without borrowing as well. His company, plus many others both big and small, runs every day without borrowing. Debt magnifies your mistakes, kills your cash, and puts your business' very survival at risk. It should be avoided at all costs.
These steps are just a few of the many principles needed to successfully run a business. Make time to keep your financial house in order, and you will always reap the rewards.
An essential characteristic of any great leader is a willingness to learn. And one of the easiest ways to gain knowledge is with our EntreLeadership Podcast. Each week, we share tools, tips and great conversation with some of the top business and leadership experts in the country, as well as interviews with fellow EntreLeaders. Listen now.