Making the courageous leap into entrepreneurship is so exciting! But it can also be very intimidating because alongside your hard work and passion comes financial responsibility, especially if you desire to support your personal life, stay in business long-term and experience growth.
Aside from working hard every day to reach maximum sales and bring profitable dollars to your business, what else can you do? Here are some tips to help you tackle financial planning and feel more confident as you pursue your dream.
1 // Control Costs
Revenue growth is a great sign that your products and/or services are in demand and that you’re making progress, but revenue is not the only number you want to keep your eye on. To move your business forward, you’ll want to maximize profits. In the simplest math, profits take place when revenue exceeds costs. So, how do you control your costs so that you don’t spend more than you’re making and jeopardize your business’ finances?
Negotiate better pricing – Always, always challenge upfront pricing. There may be an opportunity for an exclusive discount or to take advantage of special pricing program.
Research before spending – It’s tempting to quickly sign on with the most popular vendors and forget that there may be other suppliers out there willing to provide similar products and/or services with equal quality. Conduct further research to fully understand your options.
Optimize productivity – Time is money. So, wasted time is wasted money. Take a look at the processes you have in place within your business. Get real and ask yourself if there are minutes, hours or days being wasted at any point in those processes. How can you fix this? What changes can you make? This kind of detailed assessment will allow you to recognize inefficiencies that may be costing your business big time.
Regularly review and revise – Don’t get too comfortable with your spending. Make sure to get in the habit of frequently analyzing where your dollars are being allocated. When doing so, drop expenses that are no longer required while also looking for opportunities to potentially lower the costs you’re going to keep.
2 // Keep Debt Low
I reached out to a financial advisor for some input. Here’s what he had to say: “Often times when people are trying to grow businesses it is tempting to borrow money in an attempt to grow faster. Albert Einstein famously said, “Compound interest is the eighth wonder of the world. He who understands it earns it. He who doesn’t pays it.” By keeping your debt low and putting some money aside each month, you get the forces of compounding interest working for you and not against you, which can have a huge impact over time.”
3 // Stick to a Budget
Setting a budget for your business is like drawing a roadmap. It gives you the direction you need to make educated decisions about the future wellbeing of your business in mind. Your budget will be comprised of spending decisions you’ve made ahead of time, after careful research and review, which will come in very helpful when you feel uncertain about anything. You can always refer to your budget and use those predetermined numbers as a guide. The tough part is sticking to your set budget. This is where some serious self-discipline is going to come into play!
Are you sticking to a budget, but you don’t know what to do with that extra cash? Open a savings account that your money from each sale (after expenses are covered) can go into. If you can, set up a direct deposit or transfer that will repeatedly place money into the savings account.
4 // Open a Roth IRA [Individual Retirement Account]
Retirement might seem far away, but that doesn’t mean you should ignore it. Help your future self, and family, by planning ahead financially. A Roth IRA [Individual Retirement Account] is a great way to get this process started. It’s a simple, inexpensive account that is funded with after-tax dollars, which makes them more flexible if you decide to withdraw that money prior to retirement. This type of retirement account is also a great option because all the growth that occurs is not taxed!
5 // Work with an Accountant
Connect with an accountant so that you can keep your focus dedicated to growing your business, while he or she worries about the numbers. An accountant will provide valuable advice about what kinds of options will work best for the future of your business, will keep you in line with your tax requirements, and can help defog some of those difficult financial questions that pop up from time to time.