Managing Money: 5 Financial Planning Tips for Small Business Owners
Becoming a small business owner can be an exciting step to take. You’ve transformed into your own boss, and you can now make decisions that set you up for financial success.
Of course, there are also some daunting aspects to this transformation. The choices you make with success in mind could end up being the ones that lead to your business’s demise.
Fortunately, smart financial planning can put you in a strong position to prosper. Your business can be the success story of your dreams if you take some of the actions described below:
Take Baby Steps
Launching a new business can mean spending thousands of dollars on your premises, products, materials, and equipment. Some businesses also invest heavily in marketing. While all of these things can be crucial for achieving success, taking baby steps is a much smarter approach.
Instead of leasing an expensive office in the CBD, consider starting with a quality virtual office space. That way, you can still look professional for your clients, but you can do so while working from home with minimal overheads.
Usually paid monthly, virtual office rentals provide you with mail forwarding, reception services, a legitimate business address, bookable meeting rooms, and other desirable features. You can then work your way up to a physical location when you’ve gained a steady source of income.
Don’t Be Scared of Loans
Your idea of success might be a debt-free business that operates entirely on what it has in its bank account. However, very few companies get off the ground without at least some kind of funding from a third party. Don’t be afraid of loans – they could be how you kickstart your business success.
Any number of options might be worth considering to fund your business, such as business loans through your bank, venture capital from investors, and crowdfunding.
Reach Out to Financial Experts
You might be an expert regarding your products and services, but the financial side of the business might be a different story. Don’t hesitate to contact financial experts who can provide guidance, advice, and financial services.
For example, accountants can assist with your tax obligations, and lawyers can be a great source of information for choosing your business structure. The more experts you connect with, the easier it will be for you to manage your new financial obligations and achieve success.
Pay Yourself
Many small business owners are so worried about covering their everyday costs that they neglect to pay themselves. While it’s undoubtedly essential to maintain good business credit and cover associated costs, you also need to ensure you’re adequately compensated. After all, you’ll likely still have personal expenses to cover, such as your mortgage, utilities, and groceries.
You’ll know you’re ready to pay yourself a salary when you have achieved sustained revenue and have a steady projected income. You can then pay yourself based on your personal expenses or use your profit as your salary.
Establish Excellent Billing Strategies
Most businesses have had at least a few experiences with frustrating clients who don’t pay on time. For well-established companies, it can be inconvenient. For new businesses, it can spell disaster.
Establish a good billing strategy early to prevent late payers from impacting your cash flow. Consider offering discounts for early payments or aligning with invoice financing companies to receive payments in advance. You might even start requesting upfront payments from known late payers.
Being a small business owner can be challenging, especially when you’re trying to establish yourself with minimal income. Thankfully, if you take some of the actions above, you can strengthen your financial position early, paving the way for future success.
