One of the biggest drawbacks for people wanting to start their own business is money. This is usually the deciding factor between going for it and holding back, and it’s easy to understand why. These are tough financial times, but more and more small business ideas seem to be finding the capital to bring their grand idea to life.
How? By being strict on their finances and understanding where they can plan for potential pitfalls. Hopefully, if you follow these next three steps, you’ll be able to pick up a few ideas too that will make your start-up a reality.
- Be specific about expenditure
It is too often the case that start-up owners fail to ask themselves the certain critical questions. No matter what the industry, there are some particularly important ones that relate to profit vs sales. How long does it take after the sale has gone through before you actually receive the money? How are business expenses accounted for? How do you fund new equipment? Every business owner needs to know their inner financial workings so well that they could sit an exam paper on it.
Then you need to think about suppliers. How much does it cost to produce each product you sell, and how long before it can be delivered? If it’s a service, what are the running costs of providing it? Efficiency in this area can make or break a business; you don’t have to cheat on things that sacrifice the quality of your service, but try to cut costs where you can once you understand how your business runs.
- Understand your limitations
Although when you first start you might have masses of enthusiasm, your team can only work so fast. If you start trading and see a huge boost in orders and enquiries, remember not to overload your staff or they will burn out. From a financial point of view, this makes them a poor investment as their productivity is so low.
If you’re overstaffed, you’ll lose money in wages, but if you’re understaffed, you’ll lose money from incomplete orders as well as credibility when you’ve only been trading for a few months. You will only gain financial stability if your workforce matches the amount of work coming into the business.
- Apply for business credit
This is the next step up for your business, and you should check your business credit score as soon as possible. Once you’re in the position to apply for business credit, it will increase your financial stability massively.
A lot of start-ups worry about not being able to afford larger purchases on their own credit, but this offers you the ability to expand, to purchase better resources for your team, and not to mention the security you get from buying large purchases through the vendor.
Just remember to shop around for vendors though, as the best business credit cards out there can vary depending on your needs and their circumstances.
Do you have any other tips for financial stability? Let us know in the comments.