Being self-employed may be a dream come true, but the process of launching and running a successful business can be extremely stressful, time-consuming and risky. In fact, despite owners putting forth their best effort to run a successful business, many startups fail within the first few years.
Issues with financial management are a primary cause of startup failures. With a well-planned strategy and mindful money management, you can help your business to thrive in the months and years to come.
Plan Your Leap!
Some entrepreneurs simply launch a business and see where their efforts take them. They fail to develop a business plan. Remember that a business plan requires you to fully research your competitors, the need for your products and services in the marketplace, pricing and the best way to market your goods or services.
The plan will tell you how much money you may need to channel into the business over the course of the next several years. While optimism is essential for business development and success, you need to be realistic with your plans so that you are prepared for all scenarios. Keep your business plan updated over the years so that it can properly guide your efforts.
Power up Your Financial Knowledge
You can learn a lot through a high school and college education, but the unfortunate reality is that curriculum generally does not provide you with financial knowledge and literacy needed for personal money management or to run a business. According to the Program for International Student Assessment, approximately 22 percent of teens in the United States did not have basic financial literacy skills.
If you have trouble managing your personal finances, it is unreasonable to think that you would succeed with business money management. Failing to have the proper financial knowledge when starting a business can put your business at a huge risk of failure.
Hiring a financial advisor is a smart idea if you are not completely confident with your money management abilities. A financial advisor can help you in these ways:
- You can receive knowledgeable assistance from a trained expert to help you identify ways to save money through operations and through tax strategies.
- You can strategically prepare for business growth.
- You can receive help managing your personal finances in combination with your business finances.
You do not want to trust just anyone with the management of your personal and business finances. There are several strategies that you can take to find the right skilled individual to help you. For example, getting recommendations from trusted professional colleagues and asking local business organizations for referrals may be helpful.
Be Smart about Who You Hire and What Tech You Use
You may initially start your business as a one-person operation, but eventually, you may need to hire a team to help you run your growing business. The individuals who you hire directly affect the success of your business.
You understandably want to hire the most talented and dedicated individuals, and you should consider hiring a remote team so that you have access to a larger pool of qualified individuals. Hiring remotely can also save you money by eliminating overhead related to managing a large office.
The technology that your team uses is vital to your operations. It can facilitate the unified efforts of your team while also boosting productivity. While there are many technological applications available, remember that not all applications may be beneficial for your needs. Look for tasks that you or your team repeat regularly, such as those related to marketing and financial management.
You can also look for solutions to automate sales tasks, human resources tasks and other similar tasks. Remember to try out a few applications at a time to determine how effective they are for you.
Don’t Quit our Day Job
When you quit your day job too soon, you may be placing your startup in financial jeopardy. Your personal expenses may need to be funded from your business, and this requires you to pull money out of your business rather than fueling it with infusions of capital. Keep in mind that 57 percent of business owners used at least some of their personal funds to finance startup operations in 2016, and 73 percent used small business financing.
Even when your business turns a profit initially, avoid quitting your day job too soon. Remember that you may need to contribute additional personal funds into the company for future growth.
For example, you may need to infuse personal money into your startup when you hire your first employees or introduce a new product. While it is not pleasant to think about, remember that there is a chance that your business could fail. If your business fails after you have quit your job and emptied your personal accounts, you could be in dire straits.
If you have decided to start a new business or if you have already launched your business, it is critical that you apply these tips to your entrepreneurial plans. Remember that financial management requires your regular attention. If you are not confident in your knowledge or in your ability to devote adequate time to this task, hiring a professional to assist you is critical. Even when a pro helps you, however, you still need to keep a close eye on your finances to ensure that your money is being properly managed at all times.