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Launching a new startup can be scary business, especially when it comes to the financial end of things. Typically, a startup implies that you’re not just trying to find a side hustle in order to bring in a little cash. Most startups involve a bit more elbow grease, along with some financial acumen, which can often be quite complicated on the surface.
However, if you break things down and take them one at a time, the financial end of the entrepreneurial deal becomes much less intimidating. Let’s take a look at some tips that are critical for a new business owner to keep in mind as they get their operation up and running.
1. Make a Business Plan
A key part of any entrepreneurial training is the concept of making a business plan. If you don’t have a solid plan in place for your finances, chances are you’ll quickly find yourself running out of steam. Business plans allow you to map out how your money will be spent and can be instrumental in making wise financial decisions as things get going.
2. Track Your Cash
With startups, cash flow is king. You need to know what’s coming in and what’s going out. This is especially true for retail and e-commerce companies, where the logistics can be more complex. Whatever your business focus, though, make sure to track everything coming in and everything going out. This includes keeping tabs on all of your expenses via receipts, as well. Even the small stuff adds up over time.
3. Fixed Expenses
Often even a successful business can take time before revenue starts to flow. Therefore, it’s important to minimize your fixed expenses when starting out. If you need office space, get one. However, you don’t need to adorn it with expensive decor or the best coffee maker on the market as soon as you kick things off. In addition to the fact that these kinds of expenses can end up spending money that you may not have, poor allocation of funds within a startup can also affect potential investors. In other words, it looks bad if you’re dumping cash on excessive expenditures when you need that cash to keep things going.
Also, don’t be afraid to fight for a deal. This isn’t Walmart’s fixed, everyday low prices. If you’re a restaurant working with a local farmer, just because you’re working with a neighbor doesn’t mean you can’t haggle a bit over the price of the groceries. Respectfully inquire into whether or not you’re getting the best deal that you can. It’s also critical in the early days of a startup to remember to get multiple quotes from different suppliers or services before choosing who to work with.
4. Smart Expenses
Just because you’re minimizing expenses doesn’t mean there aren’t smart things to spend your income on. Look for investments that have a high ROI. For example, a custodial engineer can help keep a space clean or a social media manager might free up all of that time you’re currently putting into getting your social media presence off the ground. Also consider hiring freelancers when you can, as this can dramatically reduce the cost of hiring help.
Another way to save money is using video recording software like Screencast-O-Matic. You can record your computer screen and edit video. These videos can be uploaded online which can be quicker and cheaper than other methods of recording presentations to give to colleagues, students, and potential clients.
5. The Importance of a Healthy Mindset and Goals
It’s helpful to be positive about your startup and, at the same time, be prepared for the worst. In addition, try to separate personal finances from business finances whenever you can. Make sure to pay yourself and actively strive to keep your business budgets and personal budgets separate.
It’s also important to have both short and long term financial goals in place. This doesn’t need to be a make-or-break challenge, but having a goal to aim for can help you measure your success (or lack of it) and makes financial course corrections easier as you go.
6. Save for Tax Time
You also need to make sure that you set aside enough cash for the taxman. This is critical, as the temptation to use all of the cash available is tempting. While the amount that each business should set aside can vary, this excellent resource can help you get a feel for how to approach your taxes. It also provides a few credits and deductions to keep an eye out for as well.
7. When in Doubt…
Try to have a financial professional that you can go to with questions. Having an accountant who you trust on hand is invaluable. It’s important that you commit to using their services — e.g. don’t take advantage of them! — so that you don’t feel bad asking them questions from time to time. When you inquire into an accountant, also make sure you use a professional who is comfortable with small business practices.
Finally, remember not to panic. The financial aspect of a new venture can be a lot to take in, but if you break it down and take on one element at a time, it won’t take long before you have a system in place that will keep the wheels greased and your business as financially healthy as possible.
If you’re interested in finding out more about starting your own physical or digital business, check out this article and film, Generation: Freedom—A Business Documentary for Teens and Adults.
Dan Matthews is a freelance writer with a penchant for financial wisdom and solid research. You can find him on Twitter @danielmatthews0 and LinkedIn.