Starting a business is one of the most difficult ventures you can embark on, as it is nothing short of difficult. Creating something from the ground up and turning it into a successful business requires skill, dedication, passion and an understanding of finances. In the beginning, every financial decision that you make directly impacts your business. One wrong move and it can spell disaster for your dreams.
If you are thinking about diving head first into the entrepreneurial waters, congratulations. It’s a journey filled with ups and downs, and it can be one of the most rewarding experiences of your life. To help you navigate through the early stages, consider these five financial tips that are crucial for early stage business survival.
- Establish financial goals early on.
It’s very important that you have very detailed goals established, and this includes finance related ones as well. A lot of entrepreneurs hit the ground running with the goal of building a business that makes a lot of money. That’s great, but you need to create small measurable goals that will lead to success and growth.
When you have goals broken down into smaller weekly or even daily numbers, it allows you to remain very disciplined, but also adjust quickly if you begin to fall short. If you aren’t hitting your financial milestones it’s best to attempt to correct them sooner than later. Also, when you see smaller goals being reached, it instills the confidence to keep pushing.
- Be optimistic but also prepare for worst-case scenarios.
Nobody starts a business wanting to fail, but it’s the harsh reality for many. The odds are going to be stacked against you, but when you know this from the beginning it allows you to progress in a way that ensures you don’t hit financial rock bottom. For example, keep a full-time job that pays your bills until your business can easily replace that income. This way, in the event of a business failure your personal life isn’t impacted negatively.
You also want to prepare for hard times. What happens if business is slow for a couple of months? What if one of your best advertising or marketing channels suddenly shuts down or dries up? You should always strive to have at least 6 to 12 months of both personal and business reserves saved for an emergency.
- Don’t be afraid to pay yourself.
We often hear about the struggles that entrepreneurs face. They sell their possessions, eat peanut butter sandwiches and cut many luxuries from their life. Don’t feel like you have to struggle in order to be successful. You work hard, so make sure to pay yourself enough to live comfortably.
If you are able to live comfortably, it gives you the ability to focus on your business. Sleeping on the floor and eating crackers isn’t going to be the motivation that helps you scale a successful business. While you don’t want to go overboard, you do want to ensure you are able to live comfortably and healthy. Your mental happiness and state of mind plays a direct role in your success.
- Monitor and track all of your spending.
When you start a new business there are going to be expenses around every corner. Many of which you never thought of or anticipated. You will want to keep track of every penny you spend, so make sure to track all receipts and enter them right away into an accounting program like QuickBooks. Organization is key, and it will also make tax time for your accountant much easier.
As your business grows and your accounting becomes more in-depth you can look to hire a fulltime bookkeeper or outsource everything to an accounting firm. It’s not a budget-friendly option in the beginning, so accurate and detailed expense tracking falls on your shoulders.
- Keep your fixed expenses lean in the early stages.
A lot of businesses fail because they run out of operating money. If your burn rate exceeds your revenue-in, then you will eventually lose the ability to continue operations. If you don’t need an office, consider working remotely or find a co-working space. Take any chance you get to reduce or eliminate a business expense.
When you operate lean, it allows you to use more funds for things that contribute to business growth, like marketing and advertising, or hiring. A fancy office isn’t going to help more people see your business. Make customer acquisition and revenue your main focus and everything else will fall into place.