Are you a future business owner looking to start your own business?
You have a clear business idea and have your 4 Ps down on paper. Have you created your financial plan yet?
There are lots of financial considerations to take on board when you start a business. That’s probably why when it comes to failing businesses, 82% experienced cash flow problems. As Benjamin Franklin puts it, “If you fail to plan, you are planning to fail!”
If you want to avoid making the same mistakes as most entrepreneurs, it’s time to make a business financial plan. If you don’t have one, your successful competitors do, so why would you skip this key step?
We’re going to run over the main financial decisions that you’ll need to make as you formulate your plan. Read on!
One of our most important business finance tips applies to something you should do at the very start of your venture. Get a business bank account.
It may seem easier to use a personal bank account at first, but you need to keep your business and personal finances separate. Neglecting to take this crucial first step is likely to lead to headaches down the line.
You don’t want to confuse business and personal expenses, so keep them apart. Securing the services of a good accountant to set up your finances from the beginning is wise.
As you would for personal finances, keep all business receipts for your tax records.
You must make sure that your business is set up and registered correctly before you begin doing business. This includes making sure any county, state, and federal obligations have been met.
Whether it’s tax-related or licensing documents, you don’t want to be repeating a mistake for several years and be ultimately ruined by an enormous fine. Whether you bring someone on board to help or take care of it yourself, be sure to build your business on a solid legal foundation.
This even includes planning to fail. If the worst-case scenario does happen, you should already have prepared for it. Plan for every conceivable circumstance, especially those involving partners and investors, so you’ll know in advance how to respond in any eventuality.
If you can’t afford the services of an accountant, are you going to be able to keep track of your cash flow and budget?
It’s one thing to make your projections, but if you aren’t keeping a close eye on incomings and outgoings, how will you know when you hit or miss your goals? You’ll need to keep an especially close eye on your core expenditure and the terms of supplier agreements.
A weekly or monthly review of your financial position will let you know if you are above or below your projected numbers so that you can adjust your efforts accordingly. The sooner you identify issues, the longer you have to prevent them from snowballing by reallocating funds or securing further funding.
Figuring out how to finance a business is probably the biggest hurdle. You’ve got to spend money to make money after all, especially when it comes to financing a marketing budget.
You could dip into personal savings if you have unshakable belief and can afford the risk, but what are your other options? You might need several financing streams and should consider staggering funding injections at various key stages of early business growth.
Your business plan financials better be in good order before you show potential angel investors or bankers. Crowdfunding might be a valid option, perhaps for some industries more than others. Also, look into any federal or local government funds that might be available to startups.
After you’re open for business, it’s a whole lot easier to turn a profit when your overheads are kept to a minimum.
If you aren’t operating from home, don’t get too luxurious when considering office space. The majority of finances should be used to grow your business, not burden it down with expenses.
In the early days of running your business, closely scrutinize any expense that doesn’t serve a marketing objective.
Being able to prove on paper that your business only requires a lean operating budget will make it more attractive to investors. Keep it lean and keep them keen!
It’s inevitable that if you want a business capable of growth, at some point, you won’t be able to do it alone.
You don’t want to employ just anyone, you’ll want the best talent available, especially when it comes to key positions at the top of your business’s structure. The best talent is harder to attract, so consider sweetening the deal with incentives like stakes in the company. A vested interest will motivate peak performance from your future hires.
Ensure that you fully understand the taxation and legal implications of hiring employees before you start paying people to work for you. This will be a significant ongoing expense, so budget well and don’t forget to factor in the cost of training recruits.
When coming up with your business budget, it can be tough if you don’t have a mentor to help you who’s been there before.
Financial projection solutions are available making it easier for you to plan your business’s financial health over 3-5 years.
Your financial projection is crucial so that you can check if your future business is a viable one. The tables, charts, and graphs that you can generate will be invaluable to convincing investors, partners, and lenders of the strength of your idea.
Auto-calculating templates make it faster and easier than spending thousands for someone else to do it for you.
We’ve shown you the main financial considerations that you should focus your attention on. Don’t let your passion project fade from a future business into a failed dream.
If you’re a future business owner looking to start your own business, we can help you succeed. We help aspiring entrepreneurs easily predict the financial success of their business ideas before launching them.