Ready to take the leap from working for someone else to starting your own business? We have a rundown of some of the financial realities you’ll need to consider before diving in.
- Start with a Business Plan
If you don’t already have a business plan, you’ll need one before you start your business. A business plan outlines the first few years of your business. A good business plan not only helps you shape the concept for your business, it forces you to learn more about your industry. The Small Business Administration(SBA) can help you put together a plan, and it also has tons of great free resources you’ll need for every step of your business. Once you’ve got your business plan, you can use it to attract partners, investors, employees and more.
- Research Start-up Costs and Expenses
The SBA estimates that the average cost of starting a business is about $30,000. However, costs vary greatly depending on your type of business and where it’s located. Regardless of what type of business you’re launching, you’ll need to consider the cost of creating and maintaining a website, your office/retail space, payroll, utilities, inventory, etc. Don’t forget, there could be various fees and permit costs as well as the possible expenses of licenses and insurance. Do the research for your state/city so you won’t experience any surprise costs along the way.
- Open Separate Accounts
It may be tempting to just use your personal checking and savings account or credit card to start paying for business expenses – don’t do it! Open a business checking, savingsand credit card accounts in your business’ name. This will help come tax time and won’t muddy the waters when you’re launching your business.
- Don’t Skimp
Whether it’s software or inventory for your company, get what you can afford without cutting any corners. Paying a little more up front to get the best software for your business, etc. could make the difference between success and failure. To save money, consider renting some equipment and furniture. Leasing items will also free up more money in the beginning when you need it most.
- Track Your Income and Expenses
Sounds simple, right? Keeping track of the money coming in and going out can help you determine just how successful your business is and where to make some tweaks in the future. Start with a simple spreadsheet if you have to, just be thorough and diligent tracking everything. Once you have some experience and revenue under your belt, you can invest in a helpful accounting program for more extensive tracking. Many programs also help you with payroll, invoicing, equipment depreciation and more.
- Build Your Business’ Credit
Business credit is just as important as personal creditwhen it comes to running a business. Just like you, your business can have its own credit report and score. Having good business credit can mean the difference between getting a business loanor not. Credit can be built through working with vendors that report your payments to business credit bureaus (just ask them if they do). Smartly using a business credit card can also help build credit.
- Have a Business Emergency Fund
We’ve talked extensively before about the need of having a personal emergency fundfor unexpected costs on the horizon. The same holds true for your business. Having a few months’ worth of income saved in a separate savings account can help you plan for off-season slumps or the inconsistent income that comes with owning your own business.
Don’t be discouraged by all the financial realities and major decisions that come with starting your own business. The rewards of being an entrepreneur can far outweigh any negatives.