This post could provide advice on how to start and run a successful small business, including understanding startup costs, managing cash flow, and seeking out financing options.
If you have the entrepreneurial itch, you may have already taken the leap to start your own small business. However, according the the U.S. Bureau of Labor Statistics, about one in five businesses fail within their first year of operation. A majority of the small businesses that failed were pushed too close due to financial issues. Before jumping all in on your small business, ensure that you set yourself up success financially.
Create a Business Plan
Your first step in building a small business should be creating a business plan. Your business plan should be a comprehensive explanation of your business, including a summary of your business, a description of what your company plans to accomplish, a market analysis of competitors, your offerings, your marketing strategy, and financial projections. Throughout the beginning years of your small business, you should continue to utilize your business plan. It is meant to act as a blueprint for you and your small business to reach success.
Start-Up Costs
Most businesses require initial start-up costs, supplies, equipment, marketing, insurance, licenses, permits, and office space. However, start-up costs vary depending on what type of business you are planning to start. Prior to starting your business, you should take these costs into account. To avoid creating a large debt before starting your business, aim to mitigate these start-up costs. Only spend money on the start-up costs that are essential to getting your business up and running.
Manage Your Cash Flow
Cash flow is essential to keeping your business running so be conscious of expenses relative to revenue. Managing your cash flow is a key element in keeping your business successful.
One thing to keep top of mind is what is your break-even point overall and each month. To do this, understand the amount of expenses that you are obligated to pay each month and consider making a revenue goal with those expenses in mind.
Utilizing a cash flow management system to manage your cash flow allows you to zoom in on details or look at your finances from a broader picture. This also will keep all your expenses and revenue in one place to ensure you are managing your cash flow properly.
Financing
Signing up to take on debt can be scary, but loans and financing can allow your business to get off the ground. You can also use financing to grow your cash flow until you break even. There are several options on how to obtain a small business loan. You could go through a bank, get a SBA loan from the U.S. Small Business Administration, use a credit union, or crowdfund on website such as Kickstarter where individuals can contribute to your business and get perks or equity in return.
Consult With Professionals
To ensure you are on the right track in building your business, you should consult with the professionals. As far as legal, consult with an attorney to check if you have the proper structure for your business and the correct paperwork in place. Consult with an insurance agency to make sure you have the proper insurance coverage to protect yourself and your business. To assist with the financial side, have an accountant and financial advisor to help you manage your finances alongside you.
To make sure you set yourself and your business up for success and stay on that path, have a knowledgeable and trustworthy financial advisor on your side. Our financial advisors at LifeBridge Financial can help you reach your personal and business financial goals. Schedule your consultation with us today.
Sources:
https://www.businessnewsdaily.com/5954-smb-finance-management-tips.html
https://www.investopedia.com/articles/pf/09/business-startup-costs.asp#:~:text=Startup%20costs%20are%20the%20expenses,%2C%20promotion%2C%20and%20employee%20expenses.
https://www.usbank.com/financialiq/manage-your-business/cash-management/8-ways-for-small-business-owners-to-manage-their-cash-flow.html
https://www.nerdwallet.com/article/small-business/small-business-financing
https://www.practicalmoneyskills.com/resources/practical_money_matters/top_financial_tips_to_starting_your_own_business
https://www.lendingtree.com/business/small/failure-rate/#Whydosmallbusinessesfail https://www.sba.gov/business-guide/plan-your-business/write-your-business-pla