I've made 3 big mistakes as a small business owner that have cost me thousands

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• When I first started out as a solopreneur, I undercharged for my services with no plan to raise prices.
• I was slow to diversify my income and seek out new opportunities for passive income.
• I didn't manage my business expenses effectively and had to pay them with my personal funds.

In 2014, I started a wedding side hustle while working full-time at a tech startup. There were a lot of perks that came with running a business during my free time while I was earning a paycheck from a steady job. But in 2015, I was laid off. Instead of searching for another job, I decided to put all of my time and focus into turning that side hustle into my full-time job.

I found that one of the biggest challenges of being a solopreneur was that I was in charge of every aspect of my business. My strengths were in working with clients and marketing, not accounting or bookkeeping — or getting the most out of a small business credit card. Over time, that's caused me to mismanage my business finances and make mistakes that have cost me thousands of dollars a year.

In the past decade, here are the three biggest money mistakes I made with my small business and how I fixed them.

1. Lowballing my prices

When I first started my business, I was so desperate to gain credibility in the industry that I offered a very low rate to my first five clients. I even offered two of them my services for free in exchange for testimonials. But even as my business became more well-known and inquiries were entering my inbox, my mindset stayed the same. I wanted to have a revolving door of clients booking my services and I felt the only way to make that happen was to charge very low fees.

Potential clients would even tell me that they were shocked my prices were so inexpensive for what I was offering. Even then, I didn't raise them a dollar. Five years into being a solopreneur, I decided that I couldn't keep working with such a high volume of clients and trade my own time for money.

I looked into my business expenses and how much it was costing me to provide services to clients. Once I had that number, I increased it by 20% to account for profit. I thought about how many clients I had the bandwidth to work with every month and figured out the right price per service. I also now increase my prices by 15% every year to account for inflation.

While there's an urgency to land clients or sell products when you first start a business, figuring out your pricing isn't something that should wait years. It cost me thousands of dollars. Instead, I wish that before I launched the business, or early on, I would have done a competitor analysis to break down their pricing and offerings for my local area. That could have helped me have a baseline for my own pricing instead of just charging what I felt I deserved at the time, which was too low for the value and time I was providing clients.

2. Failing to diversify my income

As a solopreneur, I'm the only one who provides the set services for clients. For my business to make money, I have to work with a set number of people every month. By the third year of running my business, I realized that this model wasn't scalable. There were only so many people I could work with every month and I was getting burned out.

That's when I realized I needed to incorporate additional streams of passive income so that my business could earn more profit. At the time, I added one new stream of income, an online course. It took me two more years to bring in more streams, from books to affiliate links. I missed out on thousands of dollars in revenue by not having those extra streams of income.

This year, I finally added ads to my website, which have brought in a few hundred dollars of passive income a month. It took me a decade to do this, and with this stream, I could have made a few thousand dollars a year in passive income.

At first, I didn't take the time to brainstorm or research ways to bring more passive income streams into my business. When starting a new business, especially as a solopreneur, build passive income streams into your plans. That way, you can work toward implementing and growing these profit-generating opportunities over time. If I had added these to my business sooner, I would have been able to stop trading my own personal time for money earlier on and scale the business sooner.

3. Paying business expenses with my personal funds

While I do keep a close eye on my personal finances, that hasn't been the case with my business finances. Over the years, I've overspent on products, services, software, and other expenses for the business. I often have credit card bills that wipe out most of the income my business earned that month.

In order to pay those bills and save for taxes, I have to give my business loans from my personal savings account a few times a year. I rarely have the funds to pay myself back. Without having a strong pulse on my business finances, I sometimes don't have the cash flow to give myself a paycheck every month. I will go months without paying myself from the business so that I have the cash to pay expenses or vendors.

To help streamline this, I hired a bookkeeper during my seventh year in business. This helped me understand my profit and expenses. It's also kept me accountable for my own spending. Every month, I go through my credit card statements and spot any mistakes or recurring charges that I want to cancel.

In the past year, I've found a handful of charges that helped me save money. For example, last month I realized that I was paying $90 a month for a service I accidentally signed up for and am not using. In the past, I wouldn't have seen that charge for months, because I wasn't closely looking at my business expenses. Taking these actions has helped my business stay profitable and has allowed me to pay myself a monthly salary, while still maintaining a positive cash flow in the business.