Starting a new business is an exciting time. However, many new businesses fail because of bad money management. Make sure that your enterprise starts off on the right track with these five money management tips for new entrepreneurs.
1 Identify Your Goals
Many people dream of the chance to have their own business – and sometimes emotion and ambition can take over where reality should step in. Before you put money into any business, be very clear what your goals are and how you aim to achieve them. Know how much money you are going to need to get started and save double that amount. Very few businesses make money in the first few years, so make sure you have enough cash available to keep you afloat until your business gets in the black. Get your priorities clear and do your research.
2 Plan Realistically
Plan to start small first and then upscale. Look for premises that have room to expand – or try getting inventive. Paying out large sums on rent can cripple a young business, so why not look at more economic options in the beginning. A used shipping container can make a practical, cheap start-up office. Equip your business with the best equipment you can afford. For example, if you are setting up a transportation business, investing in reliable new vehicles could save you money – and headaches – in the long run.
However, if you are thinking of opening a restaurant, start by raising awareness of yourself and your products with a market stall or similar micro-setup before investing in more expensive premises and equipment. Assess the response to your product before making a huge investment, as hospitality is one of the most difficult industries to find success.
3 Separate Your Finances
If possible, keep your business and personal finances separate. Hopefully, before starting your business, you will have already got your personal finances under control. Keeping track of and justifying your personal spending is excellent practice before taking on the much greater responsibility of a business. Don’t just look at the big expenses, it is amazing how all the little things really add up. Cutting out that latte every day could give you $1000 over the year to invest in the future of your business. Analyse your spending, both personal and in your business, and consider carefully if every expense is really needed and not just something you want.
4 Keep Accurate Books
Running your own business means that you need to keep complete, accurate details of all the money that you spend, and all your profits. Keep all your receipts and maintain a ledger. For tax purposes, you will need to be able to easily retrieve any of your stored documents, so get used to being organised from the beginning.
Also, if you can see in clear figures what is happening with your business finances, you can identify where you can cut spending or where you need to invest more. Make sure that you keep up to date with all your bill and loan payments as fines for late payment can be steep. Also, pay attention to the interest rate you are paying, and avoid using your credit card to finance your business as credit cards have one of the highest interest rates. Making daily purchases in cash is a great way to appreciate how much money you are really spending.
5 Stay Informed
Creating and maintaining a successful business is not easy, so get as much help as you can. Compare rival business and learn from their successes and failures. Take courses, read books and talk to other successful entrepreneurs. The internet contains a wealth of information in blogs, articles and videos that can really help you to grow your business.
Starting your own business is a very exciting and special time in your life. When you begin by clearly identifying your goals, planning your first steps in accordance with your budget, and keeping your business and personal finances separate, you will be off to a great start.
Make sure you keep track of where you spend your money and try your best to adapt to market changes and your target audience’s needs. Remember, you can learn something from any fellow business you come across, even if it’s just ‘what not to do!’
Harper Reid is a freelance writer from Auckland, New Zealand who has written for companies such as Fuso. She learned the value of saving at an early age and still tries her best to live a simple, sustainable life. Check out more of Harper’s work on Tumblr.