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Surprising Reasons Why Business Owners Get Into Debt

6 min read

You might be surprised to hear that a lot of businesses fail in the first 12 months. They make vital errors which lead them into debt. And it means they have to end their business sooner rather than later to get out of financial woe. Therefore, it’s so important to make sure you don’t make errors with your startup. Here are some surprising reasons why business owners get into debt and ways to avoid it.

They hire too many employees in one go

When you start a business, you might need to take on some people to help you. After all, it’s hard to run a business and also provide a service at the same time. Therefore, it’s best to get some people to help out with the creative side to ensure you can concentrate on getting some clients on board. However, it’s best to start with just one or two employees. After all, you need to be able to afford to pay their wages. If you take on too many staff members, you might struggle and then end up getting the company into debt. As well as this, you will have to ensure they have all the training they need which is not cheap. After all, they will need to get health and safety training so that they don’t run into issues at the workplace. You don’t want to end up being sued as they used equipment incorrectly and got injured!


They don’t keep on top of their finances at the beginning

When you are busy creating work and finding clients, finances are often at the bottom of your to-do list. But if you don’t start keeping on top of them at the beginning, you could soon end up running into debt. In fact, so many business owners end up getting something similar to consolidation loans to help them out of debt with their startup. Therefore, to avoid running into money woe, you need to work out how much money you have at the very beginning. Make sure you know exactly what is going in and out so that you can keep on the straight and narrow. And you might want to hire a financial advisor who can warn you if you are heading into debt!


They don’t push their clients for payment

It’s easy for clients to take advantage when you are a small company. For one thing, customers might think you are more lenient about pay. And worse of all, they might assume you are doing the job as a trial before taking on proper paid work! To ensure you don’t end up getting into debt, you need to make it clear at the start how much you are expecting them to pay. You might want to send them an invoice which they will have to pay at the end of the job. And you need to ensure they are a legitimate company. After all, you don’t want to find that they don’t exist at the end of the job!


And remember not to take on too much work with limited supplies. Otherwise, you will have to buy more supplies to complete the job which could send you spiraling into debt!

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