If you have been considering starting your first business, or have just started one, I want to commend you, as launching a business is not an easy pill to swallow.
In order to help it go down a bit more easily, I will share with you my eight tips on how to be financially intelligent as a new startup, and how you can avoid financial mismanagement when launching your new business.
1. The Management of Cash Flow
There are many factors attributed to why startups fail; the most common one is running out of cash. Cash flow management helps you in tracing where every cent and dollar comes from and where it goes.
You will be jeopardizing the success of your business if you fail to stay on top of your cash flow. You will be positioning your business in a dangerous zone irrespective of how brilliant and workable your idea is. You need to create a budget for your business and stick to it.
2. Monitor and Track Your Expenses
Every new business will require both planned and unplanned expenses to be met. Employing an accountant to keep your books is not pocket-friendly, therefore use accounting software to be organized.
Although not all of them will assist you in managing your cash flow, it will make the job more comfortable when it is time to pay tax. As you expand and bookkeeping turns out to be more complicated, you can then employ the services of a professional.
3. Reduce or Limit your Fixed Costs at the Beginning
Keeping a low expenditure when you are just starting is an excellent way to achieve longevity in business.
Most first-time start-ups incur huge expenses on an elaborate office in the very heart of the city or provide meals three times a day for their employees.
Doing this is reducing the lifespan of your business.
Most of your capital is meant to be allocated to growth. Doing this will enable you to activate any perk you desire. Operate thin and put first things first! A fancy workplace and luxurious amenities are good-but not at the beginning. Generating revenue should be your top concern when starting.
4. Be Optimistic at all Times, but Get Set for the Worst
Anything can happen in business, so having a backup plan in place is always a good idea. You may not have to resign from your job which is your primary source of income until your startup can replace the revenue it brings.
Have reserves – for individual and business purposes. They can be saved in your emergency account. You can’t over prepare for unforeseen emergencies. They usually happen, most especially when you are less prepared.
Make sure you set aside some time and money for your retirement planning as well. As you work for yourself, you can’t expect a check to be waiting for you at the end of the line, of you don’t create it yourself. Find a company that can help you with retirement planning, and don’t miss a payment even at the cost of slower business development.
5. Manage Your Time
Time is money! There is nothing on earth with more value in monetary terms like time. You only have 24 hours every day, so what you do with each second counts as a first-time entrepreneur. Plan your daily schedule and tasks. Each second spent doing an unimportant task is both time and money wasted.
6. Acquire More Customers
You are in business because you have clients. The more clients you have, the more money you will make. Customer acquisition will enable you to scale. Identify prospective channels to acquire paying customers. Having identified those channels, optimize them to lower your expenses.
You can run a pilot test of each channel at the start, to know the requirements in terms of time and cost required. This will help you focus on the most lucrative ones. Once you have optimized or scaled those, you will then be able to find more.
7. Pay Yourself First!
It is not your dedication or hard work while building the business that feeds you – you need to compensate yourself. While it is not essential to pay yourself with a big salary at the start, ensure you pay yourself enough for survival at the least.
Have enough to live on while you focus on building your start-up. This will ensure personal financial stress does not affect your business. You will also be super-focused on developing your business to success.
8. Establish Your Financial Goals
Clarifying your financial goal is very important.
It is not enough to say, “I want to own a multi-billion dollar company,” you must break your financial goals down into achievable and measurable goals. Set daily, weekly, monthly and quarterly goals. These will culminate into your yearly and five year goal.
There can be room for adjustment to make room for constant growth. It is also perfect for establishing milestones to attain while you build your business. Achieving little goals will fire you up for your entrepreneurial quest. Success is inevitable if you adopt these eight tips shared above. Without commitment, you will never start, and without keeping at it, success will be out of sight.