What Founders Get Wrong in the First 24 Months of Business

You don’t walk into a gym on day one and try to lift 300 pounds. You’d get crushed. You start with lighter weights and gradually increase resistance as you build strength. Starting a business works the same way.

In the early stages, founders typically have limited scope, limited funds, and are often relying on personal savings. Success doesn’t happen immediately because entrepreneurship, like training, requires repetition and resilience. The stronger those muscles get, the more durable the business becomes.

During the first 24 months, most businesses are fragile. A common pattern is founders focusing almost entirely on technical execution instead of designing a business that works independently of them. A lawn mower starting a landscaping company spends all their time mowing lawns. A developer launching a tech company spends most of their time building product, not building systems.

Every pricing mistake, delayed collection, or unclear invoice slowly drains cash. At this stage and throughout the life of the business, cash equals survival. Weak financial foundations show up as early overspending, taking too much personal income too soon, and failing to monitor cash flow and profit margins.

After working with businesses ranging from $0 to $25M in revenue across Canada and the US, including contractors, consultants, and agencies, these are the most common early-stage financial mistakes I see and how founders can avoid them.

Mistake #1: “Revenue is growing, so everything must be fine”

Early revenue growth feels good, and it matters. But revenue alone can hide serious delivery and profitability issues. Founders often underestimate:

• Labour time required to deliver

• Subcontractor creep

• Revision cycles

• Overhead allocation

• Administrative time

• Scope drift

• And related costs

The fix:
Look at the full financial picture. While many early-stage businesses aren’t ready for a full-time finance hire, a Fractional CFO can help establish strong foundations around pricing, margins, profitability, CAC, and cash flow.

If you’re handling it yourself, start with a simple gross margin model:

Revenue – cost of service = gross margin

As a general rule, anything below 45–55% (depending on industry) deserves close scrutiny.

Mistake #2: No visibility into cash flow

Sales may be increasing and customers may be buying, yet the bank balance keeps tightening. This disconnect is one of the most dangerous surprises for small businesses. It often feels like you’re doing everything right while still chasing cash.

Running a business by “checking the bank balance” is like building on sand. Most service businesses pay for labour and materials upfront and collect from clients later. That timing gap can quietly kill early momentum.

The fix:
Use a 13-week rolling cash flow forecast and update it weekly. This gives early warning before small issues become operational crises. Cash flow tracking provides clarity on:

• What money is coming in, what’s going out, and when

• Gaps between billing and collections

• Recurring expenses like payroll, rent, and inventory

• When growth needs to be supported by additional capital

• What the next 90 days realistically look like

While this level of detail may feel excessive, it keeps businesses alive. Visibility allows founders to act early instead of reacting late.

Mistake #3: Pricing based on the market instead of the math

Pricing is one of the hardest decisions founders face because the “right” answer isn’t always obvious. Many rely on competitor pricing or gut instinct.

The problem is your competitors may be:

• Losing money

• Operating with lower overhead

• Using a different delivery model

• Leveraging offshore labour

The fix:
Price based on your own cost structure, capacity, and margin targets. Then segment customers and price accordingly. Think of it like economy versus business class seats on the same flight. Same destination, same arrival time, very different pricing.

Mistake #4: Chaotic bookkeeping

If you’re serious about running a profitable business, clean bookkeeping isn’t optional. It’s the foundation for every financial decision you’ll make.

Messy books lead to bad decisions or no decisions at all, and both are expensive. Many founders don’t see the value in bookkeeping because they’re only getting data entry, not insight. Without accurate monthly numbers, it’s impossible to see where profit is leaking.

The fix:
When done properly, clean books become a strategic asset. Invest in a competent bookkeeper who can deliver decision-ready information. Clean books create clear decisions.

Mistake #5: Hiring without forecasting capacity

One of the fastest ways to burn cash is hiring too early or too late. This mistake is especially difficult to undo because of the human and emotional costs involved.

Founders wear every hat at the beginning: sales, product, delivery, customer service, marketing, and operations. Feeling overwhelmed is normal, and the instinct is often to hire relief as quickly as possible. But knowing when to hire and what you can afford is critical.

Before opening a role, you need clarity on the unit of progress that role creates. Hiring without understanding capacity and return is a fast way to drain cash.

The fix:
A Fractional CFO can help with scenario planning, including hiring versus outsourcing decisions, by evaluating the financial impact across the entire business instead of one function.

Expert Insight: Building a Scalable Business from Day One

To add another perspective, I asked Maggie Perotini, Business and Leadership Coach and Founder of Stairway to Leadership, to share her insight.

One of the biggest mistakes founders make in their first 24 months is treating their business plan as a one-time exercise instead of a living strategy. Many create a plan for funding or formality, then file it away and shift into reactive mode, responding to whatever feels urgent.

A business plan isn’t the finish line. It’s the starting point. It should translate into an actionable strategy with quarterly goals, clear priorities, and weekly or daily actions. As the business evolves, founders should review the plan quarterly, adjust what isn’t working, and conduct a deeper annual strategic planning session.

A clear strategy creates focus. It helps founders say yes to the right opportunities and no to distractions. The businesses that scale aren’t the ones working the hardest. They’re the ones that stay strategic long enough for their plans to work.

The Bottom Line

The early stage of a business is where momentum is built or mistakes compound. A strong financial foundation in the first 24 months can:

• Build sustainable margins

• Protect cash flow

• Accelerate growth

• Replace chaos with clarity

• Reduce founder stress and burnout

• Prepare the business to scale to $1M, $3M, or $5M+

Topspin Finance works with service-based businesses across Canada to build these financial systems, create clarity, and help founders grow profitably instead of blindly.

If you’re looking for support with financial foundations, bookkeeping, pricing, cash flow, or Fractional CFO guidance, you can book a free discovery call here.