Starting a new business requires cash, and a lot of it. Regardless of how good you think your business idea is, if you don’t have any dollars, you’re going to struggle to get your start-up off the ground. So, when you’ve scrimped and saved the cash to start your business venture, you want to make sure you manage your money well and stretch it as far as it can go.
Here are a few strategies to get you started:
Educate yourself about finance
As a start-up, chances are you’re wearing a few different hats to try and get your business off the ground without incurring too many overheads. Eventually, you’ll hopefully be able to hand some of these jobs over to someone else when the workload becomes unmanageable, but there’s one aspect you should know regardless and that’s finance.
As an entrepreneur, it’s vital you understand your company’s financials. You’ll want to know how to read statements so you can analyse your expenses, income and assets. You’ll want to know how to budget and keep tabs on the movement of your businesses’ money.
While you may be able to hire a part-time accountant, it’s important you have at least a basic understanding of your start-up’s finances so you can make financial decisions with more confidence.
Create a budget that you can stick to
You may be surprised at just how many start-ups operate without a formal budget in place. It’s no wonder that 95% of them fail. Establishing a budget from the get-go helps you stay on track and reduce the likelihood of costly decisions that could cause your business to fold.
Engage the help of a business coach or advisor to formulate a budget that will highlight your short-term and long-term goals. Re-evaluate this budget weekly or monthly going over your expenses and cutting back in areas you can afford to. This will enable you to invest more in your business as you start saving money. Ultimately, a budget will give you more power in operating your business rather than just going with the flow and hoping for the best.
Give yourself a salary
While most entrepreneurs don’t factor in salary for themselves, it’s important to do so as soon as you can. If you allocate a salary (and it doesn’t have to be 6 figures!), you’ll be forced to make the budget work rather than draw money out of the business to cover your own personal expenses.
If you’re setting up this business on the side while you’re fully employed, you’ll be able to rely less on your start-up to cover your expenses. However, giving yourself a small salary will help when the time comes for you to transition to working on your business full-time.
Look for affordable, not cheap
When you’re starting out and have a small budget, spending money of the cheapest items you can find is tempting. Unfortunately, this often results in low quality products and you’ll end up having to replace them multiple times.
Budget to purchase quality, affordable items that are important to the success of your business. For example, instead of downloading a free or cheap software to manage your start-up, find one that’s affordable but will facilitate the growth of your business. Having to upgrade software to a new system later down the track will be a nightmare.
Equally important is your business premises. If you’re at the point where you’re looking for an office or shop space, instead of looking for the cheapest property in a crappy area, look for an affordable commercial property for lease. Choose an area that your target market frequents and one that’s suitable for your business type. You don’t want to have to move locations after your first year in business simply because you were trying to save a few bucks on rent.