Top 10 Financial Mistakes Founders Make 

Founders make mistakes in their early days. This can be difficult to accept, especially when you're actually making it, but it's true. If you're a founder, or want to be one, you'll need to be aware that there aren't too many huge financial mistakes people make when starting up. But there are just as many less expensive mistakes that can cost you money and resources. Here are some common mistakes founders make with their finances:

1. Underestimating Their Marketing Expenses

The most common mistake founders make underestimating their marketing expenses. Founders think their product is so good and their market is so big that they can spend all their time building it without worrying about marketing. But if you're not spending money on marketing, you're losing out on potential customers. You need to figure out realistic revenue projections and then set aside money in your budget for marketing.

2. Not Understanding How to Price Their Product

There are a lot of financial mistakes founders make, and one of the most common ones is not understanding how to price their product. This often happens because the founders sell their products without a clear vision of who they are and what they're trying to accomplish. The wrong way to think about pricing is to set a price before you have any idea of what your product offers. 

3. Not Understanding How to Allocate Equity

One of the founders' biggest mistakes is not understanding how to allocate equity. They think they have to hold all their equity in the company because they are the founders, and it's their money, so they don't need anyone else's advice. Once you have your company's financials in order, it's time to look at the total value of your company. You can get this number easily by subtracting all your liabilities from all your assets.

4. Hiring too People too Quickly

Hiring too many people too quickly is one of the founders' biggest mistakes. You need to hire slowly and let your team grow organically. Even if you're growing fast, getting a good enough team to ship your product can take a long time. And even then, they may not be ready when you launch. When you have a small team, it's easy to keep them focused on their work day-to-day. But when you have hundreds or thousands of people on your team, it's hard to keep them working together and motivated when things aren't going well.

5. Not Knowing How to Raise Capital 

Building a company is a long and difficult journey. You can't do it alone. You will need to raise capital and find investors willing to support your vision. But most of the founders don’t know no how to raise capital.  they spend all their time trying to figure out how to make money, and then once they've figured out how to make money, they sell it. That's why so many companies fail because they didn't learn how to raise capital early on.

6. Not Structuring the Business Correctly for Tax Purposes

When you start a business, there are many things you need to consider. While many of these are the same for all businesses, some are specific to your particular industry or location. One mistake many founders make is not structuring the business correctly for tax purposes.  Most founders don't understand how their company needs to be structured. They think it's just about reporting what they're doing, but that's not true. This can lead to unnecessary fees and penalties when filing your taxes in the future.

7. Poor or Unclear Financial Slides in the Pitch Deck

Another common financial mistake that founders make is that pitch decks have insufficient or unclear financial slides. Slides that don't have enough information can be very hard to understand. Investors want to know how much the company has raised, what kind of money is being raised, and how much the company is spending on marketing and operations.

8. Internal and Financial Controls For the Company

The biggest mistake founders make is not having internal &  financial controls in place. They don't understand how much money they need to start, and they don't have a plan for how to pay it back. If you don't have good internal controls, there's no way to know what's going on with the money.

9. Realistic Hiring Model to Sustain the Business Growth

The most common mistake is not having a hiring model from day one. The hiring model is the blueprint for how you will hire new people, how you will measure their performance, and what you will do with them once they have been hired. Establishing a detailed hiring process and recruiting strategy is essential to the success of your business. 

10. Making Financial Decisions Without the Advice of a Financial Expert

Most founders think they know everything there is to know about their company and the industry, but this is simply not true. In reality, many people who start companies do not have financial experts and make many decisions without consulting with any financial expert. This can lead to serious problems that can result in failure or bankruptcy.

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