Starting your own business is always going to be a challenge. It doesn’t matter what industry you are entering into, if you don’t start things on the right foot then everything that follows becomes much harder. Sorting out your financial security so you start in the strongest position possible is well worth your time. Here’s how you can prepare your finances so they are ready for the challenges ahead.
Calculate Your Most Immediate Costs
It costs money to make money. Even if you’re fortunate enough to be able to make a career out of something creative, which can feel like making money from nothing, you still need the necessary resources to create. A painter needs paints and canvas, a writer needs a laptop, and retail businesses need stock.
There are often unexpected costs associated with starting any new business, and you can’t account for everything. However, you should be able to calculate your most immediate and obvious costs without much guidance. You should always assume that there are costs you haven’t accounted for, and it’s important to leave some room in your budget for unexpected costs and occurrences.
Start Saving Now
It’s never too early (or too late) to begin saving. If you are planning on starting your own business then you have hopefully have given some thought to how you will fund your venture. There are a variety of loans and borrowing options available, but if you can fund your business without taking on extra debt then this is generally the best path to take.
Even if you’re only able to put aside a relatively modest amount, it is always better to have something in the bank than nothing. If you’re able to get even just a month or two ahead on your expenses, this can provide you with valuable breathing room while you’re still in the startup phase.
Take Account of Your Taxes
When you work for an employer, your taxes are automatically deducted from your paycheck. As a result, most working adults have never had to worry about the vagaries of the US tax system. If you want to run your own business, however, you are going to need to familiarize yourself with how taxes work for the self-employed.
Establish a Client Base
It is always best to hit the ground running when you’re starting your own business, so hopefully you will already have an idea of how you are going to make money when you first start trading. Trying to build a client base from nothing is difficult at the best of times, but if you’re trying to do it while under the pressure of needing to earn a living then it becomes even more difficult.
Reduce Existing Debt
If you launch your business while still in debt to other people or organizations, you are going to be starting from behind. It doesn’t matter how well you play your opening hand, you will have to pay off your existing debts before you can start taking money home for yourself.
Of course, saying that you should pay off your debt is very different to actually doing it. Most of us with debt have that debt precisely because we can’t afford to pay it off. However, that doesn’t mean that we can’t take action to reduce it and make it more manageable. Even if you are only able to pay off a small part of what you owe, this is always preferable to leaving a debt entirely unattended to.
Another common mistake people make with their debt is assuming that if they aren’t able to pay off at least a portion of their debt, they are powerless to address it. In actual fact, there are often a number of things you can do to be proactive about your debt. For example, loan consolidation involves borrowing the money from a single lender that you use to pay off debts from multiple lenders. This means you can swap multiple debts for a single, more manageable arrangement. Crediful has an excellent guide to the best debt consolidation lenders operating right now.
Have a System
Preparing your finances for launching your business is one thing, but you will also need to maintain your financial health and stability throughout the lifetime of your business. It is, therefore, a good idea to develop a system for managing your finances from the very beginning. Having a reliable system in place makes managing your money much easier.
The more financially secure you are when you start your business, the easier you will find it to manage. Preparing financially for launching a business doesn’t have to be difficult. Even if your resources are limited, there are still things you can do to ensure you start from the best position possible.
