Starting a business is the professional dream of a lifetime. While thousands of businesses are launched every day, history shows a pretty high failure rate. Those who take risk always paved way to their success.
The following five considerations will help to position the new business on firmer financial footing.
- Bolster your financial health
Set a threshold for the minimum amount of money in the bank that you are not willing to go below. This number will be different for each person, but the important thing to take away is that you think about what this number means to you and save it in advance. It’s important to build up and maintain this “healthy” reserve or cushion to allow you to manage the lean months or the periods of uncertain cash flow. Step back, take a hard look at your situation, and see what’s working and what’s not.
- Get over the “fear factor.”
Change is frightening for most of us. It’s only natural and appropriate to worry about the possibility of failure, jeopardizing your financial security, or reneging on your obligations to others. But sometimes we get so caught up in what we stand to lose that we forget to consider all that we stand to gain. And, we forget that we are driving the timetable and parameters for making this change.
- Build a wall in between personal and business walletes.
Set up separate accounts for your business, and consult with a knowledgeable tax professional to understand what costs are deductible. If you start recording and keeping receipts of deductible expenses from the beginning, it can help avoid major problems in the future, such as liability for additional taxes or penalties. And, don’t stop talking to a financial professional throughout the process of building your new business as it can help you feel more confident that you are managing your personal finances wisely while you begin your business.
- Beon your business, not just in your business.
When you are surrounded by your own business day in and day out, it’s important to take a step back and make sure you are handling all aspects of the business. Sometimes entrepreneurs are so focused on their product or service, that they may overlook their business’ finances. But it’s important to handle your business finances with intent.
- All money is created equal.
You need to know when and how to raise capital, (both equity and debt), and how to wisely put your money to work on things that adds value. You should be spending as much time researching what investors and lenders want as you spend understanding what your customers want. Understand the approach that angel investors take versus mezzanine debt investors. The more you know, the better positioned you will be to tap the capital markets and make the appropriate asks. Money is a tool.