Every year, a significant number of businesses are launched. But after one or two years, only a few are still operational. One major reason start-ups fail is due to poor financial management. If you are a start-up entrepreneur whose primary expertise doesn’t lie in finance, here are tips that can save your new business from going under and even allow you to grow and prosper.
To build a successful business, you need to set financial goals. Remember that one day you will retire and even before retirement, you need money to live comfortably. Set financial goals for yourself and your business. Without goals, you won’t have anything to aim for, and it will be difficult to control your spending and have a direction for your investments.
As important as the subject of money is, it’s not taught in school. That’s why so many entrepreneurs don’t do so well. You need to be educated financially. To get financial education, consider hiring a financial advisor. Your financial advisor will work with you to establish your financial goals, plan your finance, and show you financial instruments you can invest in to grow your business.
Never leave the planning and goal setting to your financial advisor; you need to be involved in the process and be willing to learn as much as you can. Don’t stop there, search online for free courses you can take and join online communities that discuss financial management.
You’re a sinking ship, financially speaking if you don’t have a budget. Budget will help you to control your expenses and provide direction for where to invest. Creating a budget forces you to be balanced in your income allocation and to spend money on truly important things.
You can’t manage your finances if you don’t know where they are going. If you don’t track your expenses, then your budget won’t be effective because at the end of the month you need to check if you kept budgeting. The process doesn’t have to be difficult or boring. There are debit cards that track your spending and forecasts how the month is going to turn out.
In business, things are not always rosy – it’s filled with ups and downs. Your major customers can decide to take their business elsewhere, and you will be left with depleted cash flow. Or a government regulation can turn the industry upside down costing you in millions and even putting you in debt.
These are the reasons why you need an emergency fund. An emergency fund is where you go to when there is a sudden change in cash flow, and you need money to keep your business running. Ensure that your emergency fund is liquid and not in money instruments that cannot be liquidated.
Starting and running a new business can be fun, but challenges are also part of the territory. You can provide yourself with a financial cushion and thrive even when the entire industry you operate in is suffering.
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