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Many entrepreneurs find it particularly difficult to recover from financial mistakes. Small businesses especially often run on very tight margins, meaning that one slip-up can be detrimental to a young company.
Here, eight Young Entrepreneur Council members share some steps an entrepreneur should take in the event of a financial mistake. Here’s why they believe these actions can help an entrepreneur to recover and learn from their errors to ultimately grow their business.
Young Entrepreneur Council members discuss how to recover from a financial mistake in business.
Photos courtesy of the individual members.
1. Admit The Mistake
One step an entrepreneur should take in the event of a financial mistake is to admit their mistake and then try to fix it. Admitting a mistake is the first step toward solving the problem, and this will reduce pressure on the entrepreneur as well as make them feel better about themselves. Additionally, admitting a mistake will help them get back on track quickly and move forward. – Kristin Kimberly Marquet, Marquet Media, LLC
2. Assess The Damage
The first step an entrepreneur should take in the event of a financial mistake is to assess the situation and figure out the extent of the damage. Make sure that you work with legal and accounting professionals with experience when you do this. It would help if you were as painfully honest with the situation as you can be. I even recommend printing out your financial statements and looking over them and making notes. Once you have a clear understanding of the situation, you can start developing a plan to address it. It’s from a point of clarity that you can come up with the best solutions to recover and fix the problems that created these issues in the first place. – Syed Balkhi, WPBeginner
3. Cut Down On Spending
An important first step is to cut down on all spending that isn’t essential to running your business. If this means going without a tool that makes some jobs easier, then you should go ahead and remove it. It’s far more important to stay afloat and build your reserves than to continue spending like everything is normal. Such behavior also builds trust in your investors and stakeholders since they’ll see you’re being responsible. – Blair Williams, MemberPress
4. Reach Out For Help
If a financial mistake occurs, it helps to reach out to a financial advisor or mentor who can guide you on what steps to take next. For new entrepreneurs especially, it’s important to learn to ask for help when you need it. There’s nothing wrong with reaching out for help if you’re confused about what to do next or how to solve your current problem. – Jared Atchison, WPForms
5. Close Training Gaps
If the financial mistake affected a client, make it right as quickly as possible. “We don’t mess with people’s money” is a core value at my organization for this reason. Of course, mistakes happen. When they do, develop those processes and close training gaps to prevent future errors. But, if financial mistakes become a pattern, you may need to take a firmer route with your team. If the financial mistake was a result of my bad judgment as a leader, I would try to learn from it. In the future, I would ask myself, “If this doesn’t pan out, can I afford to lose this money?” I try to work on my money mindset as well, to cushion the blow of financial mistakes. – Trivinia Barber, PriorityVA
6. Be Honest With Your Team
Financial mistakes happen, sometimes even with planning put in place. Things can happen unexpectedly, so it’s important to take precautions to ensure you aren’t left with zero in the bank. In the event of a financial mistake, be transparent about it. Letting investors, partners, employees and others know about the situation might seem scary, but you owe it to be honest to your team. – Stephanie Wells, Formidable Forms
7. Continue Operating Without Guilt And Emotion
Avoid getting emotionally wrapped up in the mistake. When you lose money on an investment or a deal gone wrong, a knee-jerk reaction could be to invest heavily into the next big idea to make up the loss or to stop spending altogether. Continue operating as you normally would because otherwise you might let that mistake influence your future decisions too heavily, which can make a bad situation worse. Stay process-oriented and don’t let emotions impact the way you operate. – Firas Kittaneh, Amerisleep Mattress
8. Turn It Into A Learning Experience
As long as you can still feed yourself and keep a roof over your head, chalk it up to a learning experience and use it going forward. All of the greatest financial success stories had moments of failure and doubt, and often it is the worst mistakes that most define us and refine our methods and strategies in the end. You will be a much better entrepreneur following such a mistake, even if it is hard to see the upside in the immediate aftermath. The worst thing you can do is become so discouraged you give up, turning a temporary setback into a permanent one. – Salvador Ordorica, The Spanish Group LLC