Starting a business is equal parts of excitement and anxiety. On the one hand, you’re ready to chase your dream. On the other hand, you’re worried about the ramifications of failure. It’s important that people understand how to put themselves in the right financial situation to be successful.
Do you know what it takes? Here are a handful of money hacks that have helped countless entrepreneurs get off on the right foot.
1. Understand Your Loan Options
Very few people start and grow successful businesses without any sort of financial help. Some entrepreneurs need a little more assistance than others, but the majority of small business owners have some measure of help – and it’s usually financial in nature.
If you need some money to get your business going, it’s important that you understand your different loan options. At first, it might look pretty confusing, but remember that loans are like products. Each product has unique features and the goal is to find the one that best serves your needs. When it comes to term loans – which are often used to generate long-term growth – do your homework and understand the differences between secured/unsecured, short-term/long-term, fix/floating interest, and repayment options.
2. Safeguard Personal Money
While there may seem to be little division between your work life and personal life, it’s imperative that you create some separation financially. If you’re running your business out of your personal bank account, you’re walking a very fine line.
Go ahead and open up a separate business account. It doesn’t matter if you’re spending small amounts or writing checks with lots of zeros, avoid co-mingling assets and you’ll sleep much easier at night.
“Experts recommend opening a separate business credit card and business bank account as well as putting an accounting system in place to track your expenses,” says entrepreneur Jennifer Woods. “Accounting software such as QuickBooks is a good low-cost option but if the business requires more extensive expense tracking it might be prudent to hire a bookkeeper.”
3. Calculate a Break-Even Point
Knowing your break-even point – both on a monthly basis and overall – is extremely important. This allows you to make strategic choices that are based on the numbers, as opposed to decisions that are based on feelings and emotions. Once you understand your break-even point, you can shuffle things around until the numbers work. If you don’t know this tipping point, you’re essentially playing a guessing game.
4. Have a Team of Advisors
“One big difference I see between startups that build a framework for success and those that get isolated is the ability to nurture talent,” executive Jyotsna Pattabiraman says. “Many startups believe that the way to get that expertise is by hiring a senior consultant. Yet others believe that they can figure it out through trial and error. Both approaches are expensive, one in terms of cash and the other in time.”
So, what’s the correct answer? Pattabiraman and others point to the need for an advisory board. Advisors are different from consultants in that they don’t come and go for specific projects or needs. They stay on board for the long run and will push you in the right direction. As a result, there’s a lot of continuity. And while advisors can help you with a lot of things, they tend to supply a lot of financial expertise, which can be invaluable in your pursuit of growth and stability.
Take It Easy
There’s nothing easy about launching and growing a small business, but it suddenly becomes a lot simpler when you understand how to approach the financial side of things. Think about these concepts and make sure you’re constantly reevaluating.
Featured photo credit: Chicago Tribune via chicagotribune.com