As an entrepreneur, the business world can be very promising – but also very overwhelming. You may have the idea for your business, but the capital can be harder to come across. To help your start-up off the ground, you’ll need the financing to afford a brick-and-mortar space, all your licensing, small business insurance, and so much more.
Unfortunately, too many entrepreneurs have the innovation, the viability, and the capability to manage a team of people who will help their dream come to life – but not the financial literacy. If you are still in the starting stages of your business, you may not have the funds yet to cover the services that will handle the accounting and finances for you. That’s for you to do.
Here are 7 helpful finance tips for start-up business owners.
1. Creditworthiness can boost your chances of qualifying for a loan.
In the initial stages of financing your business, you may look to a bank for a loan. In order to qualify, you’ll need to have a decent credit score first. Credit score can impact a lot of things financially – even things like your insurability, increases your negotiating power, and you have a better chance of avoiding security deposits on some utilities. It’s an easy thing to gain without putting in too much effort.
There are software and programs available that will allow you to add Internet bills and phone bills to your credit history which – if you are paying these routinely – can bump your score a little. It’s not a whole lot, but if your score is already good you can bump yourself that much closer to loan approval.
2. Plan out your budget.
When starting out, you’ll want to ensure your finances can be easily maintained and put towards your efforts as effectively as possible. To do this, it’s not a bad idea to plan out a budget. Depending on your industry, this budget could look very differently. An online store obviously won’t need to be putting anything towards rent but might allow a little more wiggle room for materials, supplies, and advertising. Keep a balance sheet for your budget to determine where you’re doing well and where you may need to tighten up a little to keep everything in order.
3. Research your start-up costs.
You’ve probably already got a handle on what are the necessary expenses – your rent, your payroll for employees, your advertising expenses, etc – but there are additional expenses you may not be aware of. Consider your industry and the type of licenses you will need to acquire, which may differ depending on where you are based. Your industry may be required to purchase a certain type of insurance.
Before you actually start spending your money, draw up a plan that includes your overall start-up cost estimates. At this point, it’s not a bad idea to start looking for investments, loans, crowdfunding, etc., since you have a better idea of what the total cost will look like.
4. Talk with the professionals
It’s a good idea to do your own research, but sometimes a professional can help you gain a more qualified perspective of what you need to do to make your business a success. Consider consulting with accountants for financial sense, insurance brokers who can tell you about which coverages you may need, and which will limit your liability, and attorneys to ensure that everything matches up legally.
5. Create an emergency fund
Emergency funds are beneficial business-wise and personal-wise. You should implement a “rainy day” funds’ plan for your business as well if something unexpected happens. This can offer you the same benefits as the one you have for your personal life if there is an unexpected setback or a particularly slow business season.
6. Track everything
It’s essential, especially from the start, to track where the money is coming from and where it is going. This can be critical to deciding where you will need to reinvest your money and where you may be able to “trim the fat” – so to speak.
If you don’t have a lot of clients from the beginning, you may be able to start with a simple sheet. Once you begin to grow, you may consider investing in more complicated financial management software. If you are in the position to do so, you can hire a bookkeeper or accountant at this point if you want to outsource the work to put your efforts in elsewhere.
7. Money isn’t everything
Although your business won’t be able to get off the ground without finances, money isn’t everything. Entrepreneurship is difficult and too many people enter it thinking they will be working less than your average 9-5. That’s not true – in fact, many entrepreneurs will end up working more than they would “working for the Man.” It takes a lot of work and some entrepreneurs may find themselves working additional part-time jobs in the meantime while they build up the finances necessary to grow their business. Drive, passion, and talent – on top of finances – are all key ingredients to becoming a successful small business owner.
