Many entrepreneurs are making a huge money mistake and they don't even know it. 

This mistake is the primary barrier against growing your business - even to the point of profitability, but certainly to the point where you could take a vacation day now and again. 

I had a hunch about this problem, but just to make sure, I conducted a survey. It was small - 55 entrepreneurs responded - but the data supported what I have seen in dozens of consultations. 

The #1 mistake is: Refusing to track their business finances. 

A third of my survey respondents did not keep any financial records of their own, but relied on monthly bank statements in the mail to let them know how much money they have and how much they spent. Some of them didn't even know if they could pay their office or personal rent each month until they got the bank statement in the mail. 

Even worse, nearly all of these respondents combined their personal and business bank accounts, or made personal purchases (from fast food to Christmas gifts) from their business account with the intention of "paying it back" later. 

Because these entrepreneurs aren't keeping any records of their finances, they don't know if there's a discrepancy on the account. Banks do make mistakes, but if they made one on these accounts, no one would ever know. 

If you aren't tracking your business finances, you are flying blind. Just tracking your finances - your revenue and spending - will give you a world of insight into your business. 

One entrepreneur contacted me and reported that when he looked through six months of his business bank account records, he was shocked to realize that a full 20% of income was spent across many small purchases of personal items, such as coffee shop lattes, flowers for his girlfriend, and convenience store trips. Imagine the difference you could make in your business if you suddenly had 20% more income available to you! 

Even if you are a solo entrepreneur, it's essential that you keep your business finances separate from personal spending. You are not your business. If you blur these lines and your business is unable to pay its debts, the courts could find you personally liable because you "pierced the veil," as accountants say, even if you have an LLC or corporation. You'll also end up spending more on accounting costs because your CPA or bookkeeper will have to sort through all your spending before they can balance your books or complete your taxes. 

Instead of depositing all income into your personal account or spending personally from your business account, write yourself checks from business to personal. It's best if you can make a salary for yourself with a set amount each month, to help make a budget within your business. However, even if a set amount isn't an option yet, you should still keep the money separate to help lessen the risks. 

Once your accounts are distinct, you will be able to better judge what your business can afford so you can take steps towards sustainable growth.

Before you can evaluate how much you should spend on any particular aspect, you have to figure out your communication budget overall. How much can you spend?

Most successful businesses spend between 1 and 15 percent of their gross revenue on marketing. The newer and less well-known your company is, the higher you need to be in that range (even though it might be a little uncomfortable).

It’s common knowledge that most small business owners cut communication before anything else when they’re in financial trouble. It seems the easiest: it’s hard to evaluate the return on investment with some strategies, and it’s not like you can just stop paying rent. However, if you eliminate marketing completely (or even mostly), how will new customers find you?

Why have a budget?

A budget – rather than spending as you go – will help you evaluate the return on investment (ROI) of your strategy. If you’re a small business, and you spent $10,000 on marketing but only made $20,000 in sales, you have a problem. Something isn’t working. But if you spent $10,000 on marketing and made $100,000 or more in sales, you’re on the right track.

Budget types

Your budget could be based on:

Most business owners are wasting their money on marketing. Some people think I'm crazy for saying that because I sell marketing for a living. But most - and I mean the majority - of small and mid-sized business owners are just burning money when they spend it on marketing.

Until you can agree with every item on this checklist, don't hire anyone to do your marketing. (You can hire someone to help you get to this place, but don't hire people to perform marketing tasks just yet.)

⦁ I know who I am.
⦁ I know what attributes make up my brand. 
⦁ I understand my brand is more than a visual identity. 
⦁ I know who my target customers are and I understand their needs.
⦁ I know what products or services I offer.
⦁ I know what price my customers are willing to pay for what I offer. (Not just money - also how much time to get it, etc.)
⦁ I have a clearly articulated value proposition. 
⦁ Every decision maker and project lead in my organization understands our target customer and value proposition. 

It takes all eight items to have a successful marketing strategy. If you start promoting your social media profiles and email newsletters before you are firm on these items, don't be surprised if little happens and your marketing money seems wasted. (If you don't know who you are, your customers won't, either.)

I've seen it happen many times. An entrepreneur decides to "just start" and change later as they get a better handle on their brand. Then every time they discover an identity that seems lucrative, they invest heavily in changing their brand to that thing. Then they do it again. And again. Nothing ever works because nothing is authentic (or has enough longevity!). 

If you can't say "Yes!" to every item on the checklist, scale back your efforts and figure out your brand.