Kudos to you for trying to start a new business. Truth be told, starting a company and building it up from almost nothing is one of the most difficult tasks to achieve in the world. Having consulted for many startups and being an entrepreneur myself, I have developed never-changing respect for every entrepreneur out there.
For this reason, I have compiled these 8 key financial tips that can help all entrepreneurs avoid some of the most common financial mistakes early startups and new entrepreneurs make when starting a new business.
Key Financial Tips You Must Never Forget as an Entrepreneur
Cash flow management is key.
Most new businesses fail for a variety of reasons, however, the most common among them all is – running out of money. Here is a financial tip you must never take for granted if you are serious about success. As an entrepreneur, you must be conscious of where every single money you’re making is coming from and disappearing to.
If you are not watchful and take your cash flow very important, you are going to put your new business in a very dangerous position. Well, what keeps a business going and flourishing is not how beautiful the idea is, but a good cash flow. Even when your customers are coming in numbers, if you run out of money in your new business venture, you’ll hit a brick wall your business might not survive.
Here is a simplified financial tip: Establish a budget and stick to it.
Track and monitor all spending.
With a new startup, there are going to be expenses coming at you from every direction. Don’t be tempted to hire a full-time staff to handle the accounting books from the start of the business. That’s not budget-friendly. You can simply make use of some accounting software, or probably outsource your accounting; it’s cheaper to outsource.
This will help you with your cash flow management and also make it quite easy when tax time rolls around every year. As you grow and the accounting becomes more complex, you will need to consider hiring a professional.
Limit your fixed expenses in the beginning.
In the beginning stages of a startup, keeping your expenses low is the key to longevity. The early days of your new business venture is not a good time to show off. You don’t need a huge elaborate office in the most expensive location in the state. You also don’t need to provide fully catered meals two times a day for your staff. You’re just starting, don’t compare yourself with the multinational you just left.
Operate thin so you can allocate the majority of your capital to growth, which will enable you to one day implement any perk you want. While writing several business plans and consulting for many startups, I have found out that too many new entrepreneurs and startups focus on irrelevances and the wrong things, such as fancy offices, competitive wage structure, and unnecessary amount of staff, among many others.
They focus on these irrelevances while forgetting one of the major financial tips that keep a business thriving – generating sufficient revenue that can translate to positive cash flow should be a top priority.
Be optimistic but prepare for the worst.
The world of business can be likened to a war front – you never can tell what will happen. For this reason, it is best to always prepare yourself for the worst possible situation. As an entrepreneur, we all engage in wishful thinking. However, you’ll agree with me that wishful thinking does not achieve anything, and is mostly far away from reality.
Here is one of the major financial tips I give to entrepreneurs – Keep your golden source of income. Never quit your job and eliminate your main source of income until your business is capable and has gained sufficient stature to conveniently replace that income.
Another key financial tip is that as an entrepreneur, always keep reserves for your business and yourself in a separate savings account. No one wishes for bad situations, however, everyone do have their fair share of it.
And unfortunately, these bad situations mostly happen when you least expect them. One of the key things that will determine your longevity in business is how you react to emergencies and unexpected bad situations.
Every minute of your time has monetary value.
I’m going to keep this short and simple: time is money. Well, I know you must have heard that before. However, it is worthy of note to bring to your remembrance in these golden financial tips.
You must realize that nothing has more monetary value than your time. You only get so much of it every day, so take that into consideration when you are planning your schedule and day-to-day duties. Every second you spend doing something unrelated to your business is time (and money) wasted.
Focus on customer acquisition.
Customers are King! Without customers, you have no business.
The sooner you figure this out, the earlier you can work on how to acquire customers fast. The faster you carry this out, the greater the chances are for your business to thrive and grow no matter what. Now, here is the financial tip; once you identify different customer acquisition channels, work on optimization to lower your costs fast.
Definitely, it’s impossible to test every possible customer acquisition channel when starting out, due to limited time and huge cost, so you should only focus on the most lucrative opportunities. My financial tip says that, you don’t have to try what everyone is trying, just focus on the best platforms your target customers are.
Once you successfully find these channels and scale them, you’ll have the financial capability to explore other channels later. So, never worry, you’re not missing out on anything, it is just a matter of time.
Make sure you pay yourself.
Unfortunately, your body system don’t function based on codes or fuel. Your hard work and commitment to your business alone isn’t going to put food on your table – you need to pay yourself. When you’re drowning in debts and bills, over time your focus and commitment to your business will fall. This is an uncommon financial tip you don’t come across just anywhere.
While you don’t need to compensate yourself with a big fat salary in the beginning, make sure you pay yourself enough to live comfortably and focus on building your business. When all personal financial stress are eliminated, you get the chance to stay ultra-focused on your business.
The financial tip in simple terms is; you can’t eat noodles and fast foods forever, give yourself a treat sometimes, not at the detriment of the business though. You deserve it.
Establish financial goals.
The last of the golden financial tips I’ll be talking about is defined financial goals. You remember what I said about wishful thinking, right? Here is where it is most applicable. Rather than just say, “I want to build a multi-million dollar company,” why not break the financial goals into smaller and measurable goals and milestones that you can follow up on?
Monthly, weekly or even daily revenue goals allow you to stay on track and make the adjustments necessary for constant growth. You can even set milestones to hit along the way, giving you a lot of smaller goals to constantly hit. From experience, I have found out that knocking out smaller goals consistently gives enough confidence that is needed to journey through the entrepreneurial world.
Finally, there are several other financial tips entrepreneurs must be watchful for, however, the financial tips explained in this article are fundamental tips you must watch out for if you want to build a successful business that will thrive in any kind of economy.
Need any financial advice for your business? Reach out for a free consultation session now!
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