Written by: Elusanmi Kolade.
7 Financial Tips for Starting Your Own Business
It is one thing to conceive a business idea, and it is also another stance of getting an entrepreneurial skill of actualizing that itch for a business venture. Starting and owning a business might pose some rocks of pessimism and downtime in its initial years, but the long-term payoff can also be financially and personally rewarding. However, here are few steps you can take to help you have a soft landing into business with a sound financial expenditure.
1. Create a business plan: using a written business plan as a guide for your first few years as a business owner can be very helpful. The process of researching and writing your business plan can also enlighten you more about the industry you are delving into, and may help you to better understand the viability of your idea.
A good place to start could be with small and medium-scale enterprise that might have the actual module which will assist and train you on how to make a business plan.
Once the business plan is completed, it enables you to be able to use it to attract partners, investors, and employees who share your vision for the future of the business.
2. Research your potential start-up costs: you might already be adding up necessary expenses in your head like a website, office or retail space, payroll if you need to hire employees, etc. However, there are also lesser known expenses that may pull up the string of surprise for first time business owners.
For example, you could have to pay fees and permitting costs to your city, county or state. And depending on the business, you may need to get licensed and purchase insurance, all of which have costs that can add up.
Knowing your actual start-up costs, which should be factored into your business plan, can be important as you look for funding. And whether you're tapping into personal savings, asking friends or family for investments, crowdfunding or applying for a loan, you should stop to consider the potential pros and cons of each approach.
3. Separate your personal and business finances: when you are starting up most especially as a sole proprietorship and decide not to form a business entity, it is rather generally a good idea to draw a thick boundary between your business and personal expenses.
One way you might consider doing so is by opening a new bank account that you will be exclusively used for business-related transactions, and putting all your business-related purchases on a debit or credit card linked to that account that you don't use for anything else.
Keeping your accounts separate can save you time when you file your tax return or need to review your expenses. If you incorporate your business, separating your personal and financial accounts can also be an essential step in limiting your personal liability.
4. Consult with experienced professionals: there is a crucial need for you to set a time aside to reach out for research and learning, but paying for professional expertise now can help you protect your business later and lead to long-term savings.
i). Attorneys: they can provide guidance as to how to structure your business and make sure the legal paperwork matches the vision in your head. They may also be able to tell you about relevant local laws that could impact your business.
ii). Accountants: they can help you determine which business type makes the most financial sense for your business and offers the most tax savings.
iii). Insurance Agents or Brokers: they can tell you about the different types of insurance you can use to limit your liability.
5. Track your income and expenses: having the clear knowledge of where your money comes from and goes can be important when you're trying to decide where to reinvest within your business and where you may be able to cut costs.
You could start with a simple spreadsheet if you don't have a lot of clients or overhead. As you grow, you'll likely want to use more complex software to manage your finances. Accounting softwares like FreshBooks, Sage, Waves, etc.
There are a variety of inexpensive cloud-based accounting, invoicing and payroll systems for sale that you can use to help with the administrative tasks. Many let you give limited access to a bookkeeper or accountant if you want to outsource some of the work.
6. Start building your business' credit: there is a clear-cut difference between personal credit and business credit which newbies in business must be aware of. Your business can have its own credit reports and scores, and you may be able to use your business' credit to secure financing or get more favorable terms from vendors.
You can start building business credit by working with vendors that report your payments to the business credit bureaus (you can ask them or look online for lists). In some cases, using a business credit card could also build your business's credit.
7. Create a business emergency fund: an emergency fund avails you the opportunity of pulling through a personal or family crisis without worrying about your finances. Consider building a separate emergency fund for your business, which may offer similar benefits in case you hit a slow season or unexpected setback.
P.S: When you strike out on your own, money will seem not to always be the most important thing, hopefully you've found something you also love to do, but you want to make sure the numbers add up. Being time conscious in making sure your finances are in order, and creating a plan for how you'll grow your business, can be essential to becoming a successful entrepreneur.
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