Launching a startup company can bring about so much excitement. But it can also bring about a lot of anxiety, especially when it comes to money. For all of your instincts telling you to aim for the stars, there are those telling you to take it easy and build your business one brick at a time. And while there are cases for both in relation to developing your product, and finding the best people for the job, when it comes to money, you cannot mess around. It’s essential that you be financially sensible and avoiding debt where you can. So, what are the best tips and tricks any budding entrepreneur should have up their sleeve in order to make sure that, not only is their business being financially sensible, but also you aren’t making financial mistakes now that you will pay for, professionally and emotionally, further down the line?
Structure Is Everything
In other words, make sure you are organized. Poor structure at the outset of your business will have a detrimental effect further down the line. Having a proper structure goes all the way back to one simple document, the business plan. Every organization you go to for financial help will want to look at your business plan, as well as your financial projections. And it sounds very simple, but a lot of people don’t put the time and effort into the business plan, so, therefore, the business ethos becomes muddled, and as a result, spending goes haywire. You can’t expect to run a profitable business unless you have a well-intentioned structure in place. The old acronym when it comes to goals is SMART: Specific, Measurable, Accountable, Realistic, and Time-sensitive.
Prepare For The Worst-Case Scenarios
When you start a business, you are throwing caution to the wind. By preparing yourself financially and emotionally for the worst situations, you can best deal with things that come your way. In terms of your finances, you should have a wealth of knowledge in place before you even finalized your business plan. A lot of budding entrepreneurs quit their jobs before heading into the supposedly lucrative arena of entrepreneurship. You need to keep your main source of income until you are confident enough that your business is self-sustaining, and then you can go it alone. While you have the best intentions in the world financially, have you thought about what happened 30 or 40 years from now? Remember, you need to prepare for your own retirement, which means you have to consider additional investments just in case your business goes belly up. Whether it’s online trading platforms, micro investing opportunities, or at the very least, owning your own home, these are all things that need to enter your mind. Because you are looking after yourself in a financial sense now, it’s important to ensure you’ve got the things in place that a standard employer would provide. These include things like a pension, but it’s also important to create an emergency fund for any dire situation.
Control Your Cash Flow Management
At the very outset, one of the biggest concerns should be how to break out of that startup curse, where 8 or 9 out of 10 businesses fail within the first year. Cash flow management is essential to ensure that everything is going as smoothly as possible. You need to know where every single penny is coming from and where it is going to. Because there are so many different areas you are trying to perfect at this crucial stage, your finances could easily slip away, or they may not even enter your mind at points. Everything might feel good, and you are getting many clients, but when you start to break it down, you might find that there is a discrepancy between your supply chains, where they aren’t paying up on time, so you have to reach into your own pockets to pay what little you have to your employees. It’s not just about having a tight hold on your money, to be financially sensible you need to acquire the relevant knowledge. And while this comes with time, you can best prepare yourself for the onslaught before you’ve even opened your business. Getting yourself educated, either by speaking to people in your chosen industry, or actually getting a degree can be very advantageous. You can study for a supply chain management degree online, or look for the numerous free business studies resources on the internet, and they will all prove to be beneficial, especially if you are heading into the ether without the relevant knowledge. Our heart can rule our heads when it comes to starting a business, which is why it’s important to have a modicum of sensibility. Your cash flow management has to be second to none. If you can’t track the income, not to mention the expenses, the business will go downhill fast. It’s been easier now more than ever to track your cash flow, especially with accounting software like QuickBooks. But, at the very least, you should have some sort of system in place, even something as simple as a spreadsheet will help keep you on track.
Don’t Go All Out At The Start
The temptation in every area of your business is to go in all guns blazing at the very outset. As far as your finances are concerned, this is very foolish. The best way to ensure longevity is to make your expenses as minimal as possible to begin with. Think about what you actually need at the very beginning of your startup. If you only have a skeleton staff, do you really need to have an office? Instead it might be better to implement remote working scenarios, where people have their own computers and internet connection. That way, expenses are at a minimum, and so you are focusing on the business, not the fancy accoutrements. Meeting clients does consist of expensive lunches on occasion, but it can be easy to overindulge in this aspect of life. Instead of enjoying the lifestyle that comes with growing a business, your priority should be about generating income and profit.
Time Is Money!
Yes, it’s a major cliché, but it’s true. And by adopting the mindset that time is money, you will work harder at developing processes that make life easier, not just for yourself, but for your employees. You can spend a lot of time working on improving your processes, which means that your focus goes away from the actual work on developing the business. Finding that delicate balance can take some time, but once you start to realize the importance of investing the right amount of time into something, especially when planning your schedule for the week, then you will realize how much time you are potentially wasting. The best way to think about this is to understand the monetary value of time wasted on your business. Once you put a specific figure on it, then the message hits home. From then, you won’t waste another minute.
Remember To Pay Yourself
You can work so hard at paying your employees for a good job well done, that you don’t pay yourself! You might feel that it’s a necessary evil to forgo your own finances for the benefit of the business but you still need enough money to live. You could easily save money before starting the business, so you’ve got enough of a cash buffer to keep you ticking over, but you still need to pay yourself what you think your role is worth. You don’t have to pay yourself a fat salary, but you still need to have the focus to grow your business properly. And if you’ve been living off cheap microwavable meals for the last 6 months, you need to give yourself a break, and indulge in that little bit of comfort. It will make you feel better, which will positively impact your business. And likewise, if you don’t fund your business enough, you will end up reaching into your own pocket to keep the business afloat. This becomes a very detrimental cycle, especially if it keeps happening. In the end, you’ll end up without money to live, and your business struggles for a long time, before grinding to a halt.
Not to be negative, but you have to embody some financial sense at the very beginning. Entrepreneurs by their very nature have to be risk takers, but this is a very dangerous attitude to have when it comes to ensuring you’ve got enough money to play with. There is a time when you can start to take risks, but the first year or so is not it. When you had the idea, no doubt you wanted it to be a roaring success, but every aspect needs to be broken down into manageable goals. Your finances are the structure in which your business lives or dies. Once you’ve made a success of one aspect, then you can either bootstrap, or you can acquire more financial help. But it’s important to realize that for your business to survive at the very outset, being sensible with your finances is the best course of action.