startup mistakes http://www.wisebread.com/taxonomy/term/15047/all en-US 4 Common Investment Mistakes With First-Time Profits http://www.wisebread.com/small-business/4-common-investment-mistakes-with-first-time-profits <div class="field field-type-link field-field-url"> <div class="field-label">Link:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> <a href="http://www.openforum.com/articles/4-common-investment-mistakes-with-first-time-profits" target="_blank">http://www.openforum.com/articles/4-common-investment-mistakes-with-first-time-p...</a> </div> </div> </div> <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/small-business/4-common-investment-mistakes-with-first-time-profits" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock_000009169639Small.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="166" /></a> </div> </div> </div> <p>One of the most exciting moments in a <a href="http://www.openforum.com/idea-hub/topics/money/article/10-tips-from-bootstrapping-entrepreneurs-1" target="_blank">young start-up</a> is that first instant your business turn an honest-to-goodness, completely legitimate profit. You've paid all your bills, you've settled all your debts for the month, and lo and behold you still have money left over. Hallelujah!</p> <p>This is a point when a lot of businesses, caught up in the sheer thrill of having extra cash for the first time <i>ever</i>, make mistakes that could cost them everything. Here are four of the most common, and what you can do to avoid them.</p> <p><strong>1. Alright, I Can Finally Pay Myself, Maybe a Lot!</strong></p> <p>It's tempting after scrimping and saving for so long to cut yourself a little bonus when you can finally afford it. But this is one of the worst things a business owner can do, especially with the spoils of a first-time profit. While you might be just dying to take that extra bowl of profit, suck it up, Oliver: the times of plenty can be deceivingly short.</p> <p>You can invest initial profit in any number of constructive ways: have a website professionally built, pay down your small-business loan, save for a rainy day (there will be many.) But resist the urge to spend frivolously on yourself. Every dollar you put back into the business has a <i>chance</i> to come back to you, while money not funneled back has <i>no chance</i> to return. Do not cash out early, even with a teeny tiny bonus to celebrate finally seeing black. That&rsquo;s what retirement is for, whippersnapper.</p> <p><strong>2. Buying Advertising without Doing the Research</strong></p> <p>One of the biggest bloopers I made when I first turned a profit as a small business owner was buying a lot of advertising without doing market research.</p> <p>Advertising is, of course, <a href="http://faculty-gsb.stanford.edu/draganska/documents/AnEmpiricalInvestigationoftheEffectofAdvertising.pdf" target="_blank">quite essential for creating and maintaining brand awareness,</a> but it's nothing that should be bought impulsively, especially with early profits. &quot;But I could finally see my business&rsquo; name in the Big Print, woo-hoo&quot; you think. But how much return are you getting on that 8 x 11 ad you placed in <i>Regional Magazine None of Your Clientele Reads Monthly? </i></p> <p>I&rsquo;ve seen a lack of advertising destroy many promising small businesses. Brand awareness is important. But do your research first. Or better yet, hire someone who knows advertising to do it for you&mdash;though maybe temporarily.</p> <p><strong>3. Hiring an Employee You Can&rsquo;t Afford Long-Term</strong></p> <p>Temporarily, I say, because promising someone a long-term job is not something to be taken lightly. One of the most heartbreaking things I went through as a business owner was laying someone off because I violated this rule. So I understand why it&rsquo;s tempting. You&rsquo;re busy. You want to hire help, but consider doing it on a seasonal or trial basis. <i>Then</i> see what the cash flow situation is like.</p> <p>Taking on extra employees is great&mdash;you&rsquo;ve become one of those fabled &ldquo;job creators.&rdquo; But hiring someone, promising someone a steady job, is a serious commitment. Don&rsquo;t make promises until you can keep them, but also until an employee&rsquo;s services are necessary&mdash;that is, the job has grown to something you absolutely can&rsquo;t do yourself. Because extraneous employees are also a violation of rule number one.</p> <p><strong>4. Don&rsquo;t Over-Expand, Captain Hubris</strong></p> <p>Growing small businesses often have that urge to expand, and expand fast!</p> <p>Before expanding the scope of your business, ask yourself first: are there gaping holes in your model that need to be fixed? The answer is, if your business is young, almost definitely. While you want to grow, and you can&rsquo;t grow without taking risks, your business foundation needs to be absolutely sound before you use it to prop up a new harebrained venture. Hubris kills business. Just because you can capitalize a new venture doesn&rsquo;t mean it needs to happen now! Take every new chance to expand with the same seriousness with which you initiated your initial business venture, take a sober look at your <a href="http://www.irmi.com/online/insurance-glossary/terms/f/financial-capacity.aspx" target="_blank">financial capacity</a>, and you&rsquo;ll minimize your business&rsquo; risk of Death by Over-Expansion.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/jacob-harper">Jacob Harper</a> of <a href="http://www.wisebread.com/small-business/4-common-investment-mistakes-with-first-time-profits">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-5-biggest-mistakes-freelancers-make">The 5 Biggest Mistakes Freelancers Make</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/250-tips-for-small-business-owners">250+ Tips for Small Business Owners</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-find-freelance-clients-part-two">How to Find Freelance Clients: Part Two</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-5-best-credit-cards-for-small-businesses">The 5 Best Credit Cards for Small Businesses</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-things-all-successful-freelancers-do">10 Things All Successful Freelancers Do</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Entrepreneurship Small Business Resource Center investment marketing profitability small business startup mistakes startups Thu, 17 Nov 2011 00:54:20 +0000 Jacob Harper 781129 at http://www.wisebread.com