{"id":11969,"date":"2019-09-09T06:36:15","date_gmt":"2019-09-09T04:36:15","guid":{"rendered":"https:\/\/www.invoiceberry.com\/blog\/?p=11969"},"modified":"2019-08-25T13:11:22","modified_gmt":"2019-08-25T11:11:22","slug":"smb-finance-myths-holding-you-back","status":"publish","type":"post","link":"https:\/\/www.invoiceberry.com\/blog\/smb-finance-myths-holding-you-back\/","title":{"rendered":"11 SMB Finance Myths That Are Holding You Back"},"content":{"rendered":"

As an SMB, your <\/span>finances<\/span><\/a> are all you\u2019ve got. If you ever want to scale up and thrive as a business, you should make sure your finances are in check.<\/strong> But, with that said, finances have always been a topic shrouded by myths and misconceptions in the startup world. <\/span><\/p>\n

Admittedly, finance can be a somewhat complicated subject for entrepreneurs since there are so many things you need to <\/span>keep in mind<\/span><\/a>. <\/span><\/p>\n

But on the bright side, there are just as many online free <\/span>resources<\/span><\/a> available to guide you through the journey. And even if you don’t even know the difference between <\/span>your <\/span>balance sheet<\/span><\/a> and your\u00a0<\/span>cash flow statement<\/span><\/a>, don\u2019t worry – \u00a0there is hope just yet.<\/span><\/p>\n

So, in this guide, we\u2019ll be clearing up some of the myths that surround the finance sector of the SMB world. If you\u2019ve ever fallen for the common misconceptions that hold many entrepreneurs back, be sure to read on\u00a0<\/span>as we\u2019ll be shedding light on some of those myths.<\/span><\/p>\n

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\n \t\t\t\t\t\t\t\t3 Important Financial Questions For SMBs to Keep in Mind<\/span><\/a>\n \t\t\t\t\t\t\t\tFor SMBs, finance is something that can make or break your future. This is why it's so important to ask yourself the following questions as a business to operate effectively.<\/span>\n \t\t\t\t\t\t\t\t\n \t\t\t\t\t\t\t\tREAD MORE<\/a>\n\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t\t\t
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Myth 1: You don\u2019t need a business plan<\/b><\/h2>\n

This is somewhat of a recent trend that says startups don\u2019t need a business plan and will be fine if they just dive headfirst into the real world.<\/span><\/p>\n

While you might survive for a year or two at most, it\u2019s safe to say that <\/span>you won\u2019t make it far without an <\/b>effective business plan<\/b><\/a>. Business plans are an essential part of your long-term strategy, which includes the goals and the means through which you achieve them. <\/span><\/p>\n

Not to mention, if you ever want to <\/span>scale up<\/span><\/a> as a business, you need a reference document to look back on and share with other people.<\/span><\/p>\n

Myth 2:<\/b> You won\u2019t be able to profit for a very long time as a startup<\/b><\/h2>\n

This is another common myth that often holds entrepreneurs back. <\/span><\/p>\n

Though, let\u2019s first take a step back to examine the importance of profit as an SMB.<\/span><\/p>\n

You need profit and money to survive, yes, however, if you\u2019re just after the <\/span>gross profit<\/span><\/a> – you might not get far in the first place. <\/span><\/p>\n

Instead, you should be focusing on fulfilling a certain need. <\/span><\/p>\n

\"SMB-Finance-Fulfilling-A-Need\"
If you want to make it far as a startup, you need to have your finance in check but also know your one true calling.<\/figcaption><\/figure>\n

If you truly believe in your vision, you won\u2019t gain <\/span>burnout<\/span><\/a> from your startup.<\/span><\/p>\n

Though, with that said, it\u2019s certainly possible to start making money as a startup within the year – depending on your niche and expertise. By focusing on your vision, however, you\u2019re more likely to last longer as a business.<\/span><\/p>\n

Myth 3: You should be prioritizing revenue over profit or vice-versa<\/b><\/h2>\n

First off – what\u2019s the difference:<\/span><\/p>\n

Revenue<\/span><\/a> is the money you earn from the sale of goods or services and it measures the total income from sales.<\/span><\/p>\n

Profit<\/span><\/a>, meanwhile, is what you get once you subtract the expenses that go into the making of the product.<\/span><\/p>\n

Ideally, as a startup, you should be focusing on growth and the revenue and the profit will come in naturally.<\/span><\/p>\n

If you want to survive as a business though, you should at least have a positive level of <\/span>cash flow<\/span><\/a>, so, start there.<\/span><\/p>\n

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\n \t\t\t\t\t\t\t\tRevenue vs Cash Flow – the Facts<\/span><\/a>\n \t\t\t\t\t\t\t\tThe difference between revenue and cash flow can make all the difference to yourbusiness\u2019 financial health. Revenue vs cash flow - what are the facts?<\/span>\n \t\t\t\t\t\t\t\t\n \t\t\t\t\t\t\t\tREAD MORE<\/a>\n\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t\t\t
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Myth 4: You must raise money up front to succeed<\/b><\/h2>\n

Of course, the more money you have beforehand – the better.<\/span><\/p>\n

But this is not to say you won\u2019t survive without it. <\/span><\/p>\n

If you start things off right and start saving unnecessary <\/span>expenses<\/span><\/a> straightaway, you can save money and<\/em>\u00a0go far in your niche.<\/span><\/p>\n

Bootstrapping<\/span><\/a> is a great way to minimize costs and get to know your priorities. <\/span><\/p>\n

With a shoestring budget, you\u2019ll learn the importance of priorities and that you don’t need as many things as you think you do. Many companies started out this way, working from their garage and getting a loan from friends and family instead of the bank.<\/span><\/p>\n

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\n \t\t\t\t\t\t\t\t13 Innovative Ways to Finance Your New Business<\/span><\/a>\n \t\t\t\t\t\t\t\ttoday we\u2019ll look at the 13 most innovative methods entrepreneurs have used (and are using) to finance their new business.<\/span>\n \t\t\t\t\t\t\t\t\n \t\t\t\t\t\t\t\tREAD MORE<\/a>\n\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t\t\t
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Myth 5: You need a lot of money to scale up and grow as a new business<\/b><\/h2>\n

This is another common myth. Of course, money is essential to growth, but not as much as you might think.<\/span><\/p>\n

While you can save money with bootstrapping, what you can also do is borrow instead of paying, rent instead of buying and so on – you get the point.<\/span><\/p>\n

The idea is to turn fixed costs into variable <\/span>costs<\/span><\/a>. This way you\u2019ll save money that you can put into scaling up instead.<\/span><\/p>\n

Myth 6: Banks don\u2019t lend money to startups<\/b><\/h2>\n

According to the Biz2Credit Small Business Lending <\/span>Index<\/span><\/a>, big banks approved 23% of funding requests in March. While this number may not seem high, it\u2019s still better than the alternative sources of debt (family, friends, venture capitalists, etc). <\/span><\/p>\n

Also, this marks a trend in the loans taken from the bank for startups as it is an increase up to two-tenths of a percent from February 2016.<\/span><\/p>\n

\"SMB-Finance-Going-To-Bank\"
If you do decide to go with the bank option for funding, make sure you’re as prepared as you can be.<\/figcaption><\/figure>\n

Your mileage may vary and it also depends on where you\u2019re from. (For example, you have a lot of choice if you\u2019re from the <\/span>U.S.<\/span><\/a>) but for the most part, the more prepared you are when going to the bank for a loan – the better.<\/span><\/p>\n

Speaking of\u2026<\/span><\/p>\n

Myth 7:<\/b> Venture capitalists are the only source of funding<\/b><\/h2>\n

While VCs can help you go from a 0 to a 100 quickly, they\u2019re not the only way you can scale up.<\/span><\/p>\n

Other popular methods include crowdfunding, kickstarters, microloans from the bank, and more. <\/span><\/p>\n

As an SMB, you need to take a step back and ask yourself a couple of <\/span>questions<\/span><\/a> in regards to where you\u2019re headed and how you’re going to get there before you advance.<\/span><\/p>\n

Myth 8: If you build it, they will come<\/b><\/h2>\n

Let\u2019s say you have an amazing product or a service with a lot of potential. Naturally, customers and interested venture capitalists should start flocking to you, right?<\/span><\/p>\n

Well, this is also not the case because it\u2019s not all about the product. <\/span><\/p>\n

You also need to spend some time on marketing and selling the product, which are just as important for growth. And you should also be actively looking for an investor or a business accelerator.<\/span><\/p>\n

And when scaling up, remember not to focus only on the product (by hiring more developers, etc.). Customer support and building close relations with your users are just as important.<\/span><\/p>\n

Myth 9: If you\u2019re unsure about your pricing strategy, just undercut your competitors<\/b><\/h2>\n

Pricing<\/span><\/a> is always a complicated area as a business. And though undercutting your competitors is a common tactic – it\u2019s not the best one. <\/span><\/p>\n

If anything, it could lead to devaluation of your product and not even being able to break even.<\/span><\/p>\n

So, what\u2019s the solution here? <\/span><\/p>\n

To ensure competitiveness and profitability of your product, you need to know it inside out (including the 4Ps: product, pricing, promotion, place), research the product and service costs involved, and finally – the customer demand.<\/span><\/p>\n

If you\u2019re in the SaaS (software as a service) niche, you can look into using the freemium\/versioning model and see how that will work for you.<\/span><\/p>\n

\"InvoiceBerry-Finance-Pricing-Strategy\"
What the InvoiceBerry pricing approach looks like as a SaaS.<\/figcaption><\/figure>\n

Myth 10: If you need finance, you have to sacrifice equity<\/b><\/h2>\n

Equity, or stockholders\u2019 equity, shows up in your <\/span>balance sheet<\/span><\/a> and is essentially the amount of capital invested by the shareholders.<\/span><\/p>\n

But as mentioned above, you can get far as a startup without having to lose a lot of equity through a variety of different methods.<\/span><\/p>\n

Though banks often see startups as a risky investment, there are many other ways you can finance your business with a more flexible source of funding.<\/span><\/p>\n

Myth 11: You\u2019re going to be rich and live glamorously<\/b><\/h2>\n

Well\u2026 I don\u2019t want to discourage you from pursuing your dreams but most (9 out of 10) startups <\/span>fail<\/span><\/a>. <\/span><\/p>\n

Of course, there are a lot of reasons behind this (business incompetence, lack of experience, etc.) but the main point is this: <\/span>if it fails, it might be because of you.<\/b><\/p>\n

It\u2019s often the owners who end up making the wrong business moves and go down a slippery slope.<\/span><\/p>\n

On the bright side, failure is the best teacher.<\/b><\/p>\n

Most startups fail, yes, but this doesn\u2019t mean you can\u2019t start another business venture later. And success doesn\u2019t happen overnight. <\/span><\/p>\n

If you\u2019re passionate about your vision, you should definitely pursue it. <\/span><\/p>\n

Though money is a side product and even though things can get <\/span>rough<\/span><\/i>, as long as you\u2019re following your dream – then you\u2019re already on the right track.<\/span><\/p>\n

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\n \t\t\t\t\t\t\t\tReasons Why Some Small Businesses Succeed and Others Fail<\/span><\/a>\n \t\t\t\t\t\t\t\tEver wondered why so many small businesses fail while others succeed? Check out the most common mistakes small business owners make and how to avoid them!<\/span>\n \t\t\t\t\t\t\t\t\n \t\t\t\t\t\t\t\tREAD MORE<\/a>\n\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t\t\t
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Conclusion<\/b><\/h2>\n

All in all, the startup world is <\/span>not<\/b> easy. And it\u2019s not for everyone.<\/span><\/p>\n

But at the end of the day, life, (like startups), is all about taking risks. <\/span><\/p>\n

And if it doesn\u2019t work out, you\u2019ll come out with much more knowledge out of it than before. <\/span><\/p>\n

Be warned though, you might not know what you\u2019re getting yourself into. So, it\u2019s best to familiarize yourself with some common myths and misconceptions first. <\/span><\/p>\n

And if you\u2019re just starting out, be sure to stay on top of your finances if you want to survive. This way you won\u2019t get lost halfway through. <\/span><\/p>\n

If you\u2019re not sure how to do that, consider using <\/span>online invoicing software<\/span><\/a>\u00a0as a cost-effective way of tracking and analyzing the financial situation of your business.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

As an SMB, your finances are all you\u2019ve got. If you ever want to scale up and thrive as a business, you should make sure your finances are in check. But, with that said, finances have always been a topic shrouded by myths and misconceptions in the startup world. Admittedly, finance can be a somewhat […]<\/p>\n","protected":false},"author":13,"featured_media":11975,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"spay_email":"","footnotes":"","jetpack_publicize_message":""},"categories":[345,91,56],"tags":[265,103,146,57,69,230,275,11,58,62],"jetpack_featured_media_url":"https:\/\/i1.wp.com\/www.invoiceberry.com\/blog\/wp-content\/uploads\/2018\/10\/SMB-Finance-Myths-Holding-You-Back.png?fit=1380%2C580&ssl=1","jetpack_publicize_connections":[],"jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p5m6q6-373","amp_enabled":true,"_links":{"self":[{"href":"https:\/\/www.invoiceberry.com\/blog\/wp-json\/wp\/v2\/posts\/11969"}],"collection":[{"href":"https:\/\/www.invoiceberry.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.invoiceberry.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.invoiceberry.com\/blog\/wp-json\/wp\/v2\/users\/13"}],"replies":[{"embeddable":true,"href":"https:\/\/www.invoiceberry.com\/blog\/wp-json\/wp\/v2\/comments?post=11969"}],"version-history":[{"count":13,"href":"https:\/\/www.invoiceberry.com\/blog\/wp-json\/wp\/v2\/posts\/11969\/revisions"}],"predecessor-version":[{"id":11986,"href":"https:\/\/www.invoiceberry.com\/blog\/wp-json\/wp\/v2\/posts\/11969\/revisions\/11986"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.invoiceberry.com\/blog\/wp-json\/wp\/v2\/media\/11975"}],"wp:attachment":[{"href":"https:\/\/www.invoiceberry.com\/blog\/wp-json\/wp\/v2\/media?parent=11969"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.invoiceberry.com\/blog\/wp-json\/wp\/v2\/categories?post=11969"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.invoiceberry.com\/blog\/wp-json\/wp\/v2\/tags?post=11969"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}