Launching your own business is no easy task. When most entrepreneurs start out, business administration functions usually fall in their laps until they can afford to hire more staff. One of the most important aspects of running a successful company is managing the finances properly. And having the right processes in place from the beginning can be the difference between leading a prosperous business and one that crashes and burns.
When sales go down, it can be tough to navigate and stay positive, but these five finance tips can help keep things manageable and running smoothly:
1. Set Financial Goals
Having goals for your business is not only a good idea; it’s practically essential. Financial goals are equally as important, so you have something to work toward. However, understand that financial goals are fluid and should be adjusted as circumstances change. Evaluate your current revenue and expenditures and determine what metrics would make you feel financially stable. Are you aiming to pay off debts as quickly as possible? Hit a certain net income target? Or begin contributing to a retirement plan? As an entrepreneur, your personal and business finances are intertwined, so think about the goals your business needs to hit for your household finances to function, too.
2. Track Cash Flow
Stay aware of your monthly cash flow and adjust as needed. Over time, using tools such as QuickBooks or a simple spreadsheet can illustrate months where there’s a dip in income and will allow you to plan ahead to curb costs and minimize money flowing out of the business during those seasons.
3. Hire the Right Talent
Skimping on talent almost always proves to be a waste of money in the long run. Identifying, onboarding, and training great people is an investment, and settling for less than you need often lands you back at square one when the employee doesn’t work out. Take the time to understand what tasks you can offload and where your strengths can make the greatest impact on the business. Get an idea of the capital you can spend on human resources for your venture and determine what growth you’d need to realize to fund that additional salary. With tasks removed from your plate and a new focus on revenue-generating activities, you might be able to afford that team member sooner than you think.
4. Avoid Credit Card Debt
Credit cards might seem like a good option to meet the cash needs of a business. However, they generally have some of the highest annual percentage interest rates of any debt and can have costly annual fees depending on the card. It’s often better to establish a line of credit with your preferred banking partner, but if you do opt to use a credit card, be sure to pay off balances each month and select cards with little or no fees.
5. Enlist Experts to Protect You
Assembling a team of experts to help get your business started can be one of the best investments a business owner makes – not only for your company but also for yourself. Tapping in the expertise of a financial advisor, CPA, banker, insurance agent, and attorney is not merely about freeing up your time. It’s about planning for the ‘what if’s’ that could sink your new endeavor before you even get off the ground. Legal advice, insurance coverage, and planning ahead for financial curveballs is not where you want to skimp to save money.
Just like entrepreneurs create a strategy for your business, it’s also important to start off with good financial strategies in place – giving you and your business the greatest chance for long-term success.