If you are considering starting your own small business, you should make sure that you are financially prepared for the process. As the age-old adage goes, you have to spend money to make money.
However, you should be smart about how you are spending money while you start your new business venture so that you can be more profitable and not end up in financial ruin.
Below are a few ways that you can save up money to start a business and continue to save money after your business has started.
Pay Off Debt
Before you start your business, it’s a good idea to make sure that you are personally able to help get the business off the ground financially. If you are in a lot of debt, you may not be able to get the best rates on loans or have the extra money in savings to back your business.
Try to pay off as much debt as you possibly can before starting your business. Some types of debt, like mortgages, are meant to last for a long period of time, so it makes sense to still have those, but you don’t want debts that accrue from financial irresponsibilities, like credit card debt.
Build an Emergency Fund
Having an emergency fund is a smart financial choice even if you aren’t starting a business.
Since starting a business is a financial risk, it is smart to have an emergency fund that can cover one to two months of all of your basic expenses so that you are ready in case your business takes a hit or fails.
The amount that you save up in an emergency fund will vary depending on your personal expenses, so make sure that you know what your basic monthly expenses are before deciding on the amount to save.
Cut Back Where You Can
If you don’t already budget your money carefully, it is a great time to start doing so. Look at your spending for a few months to figure out the average cost of your bills, groceries, and other expenses so that you can figure out a realistic budget for yourself. Once you’ve figured out what you usually spend, you can start figuring out where you can cut back.
Maybe you didn’t realize how often you were eating out for lunch, but now that you are aware you can start making your own lunch to save on the cost of eating out. Cutting back doesn’t mean that you have to completely stop doing everything that costs a little extra money, it just means spending less on discretionary things like coffee. If you go out for coffee every morning right now, you could just start buying a cheaper drink or only going twice a week.
Choose Your Market Smartly
When it comes to actually starting your business, you want to make sure that you aren’t starting in a market that is already extremely over-saturated. Try focusing on growing industries and markets, like the fiber-optic cable manufacturing industry, which has grown by 11.8% in the past five years.
Make sure that your proposed business stands out in some way and fulfills a need that is not being met by the current market. For example, if you want to start a clothing brand, making clothes that are more size-inclusive is a great way to join in a market that is currently growing rapidly and has a lot of customers ready to buy.
Half of all small businesses fail in the first five years. However, if you are trying to be smart about your budgeting, expenses, and spending, you are setting your business up to last for much longer. When you are starting your business, try to minimize your expenses where it is possible. Here are a few ways to do so:
- Buy Used When Possible. When you are setting up your business, try to buy any equipment that you can second-hand. When it comes to setting up an office space, for example, you really don’t need a brand new desk. Buying one used online can save you a lot of money that you can save to put in your emergency fund or reinvest in the business.
- Keep It Virtual. If you are starting a business that does not have to be conducted in person, consider keeping it virtual for as long as possible. This could mean having an e-commerce store to start and only having physical sales at local pop-ups, or it could mean having your employees work from home. Not having the expense of renting a storefront or office and not having to supply the needed materials for a physical space means that you can use that money for more important parts of your business, like marketing or a new round of products.
- Only Hire Who You Need. If you have a busy season for your business, consider hiring seasonal employees instead of hiring permanent employees that end up doing next to nothing for most of the year. If possible, outsource work to accounting or marketing firms as well instead of hiring an in-house person to do the work.
Start Small and Build
When you start your business, you want to start with products that will yield the highest return profit on your investment. For example, if you’re starting an e-commerce store that has prints, clothing, and stickers with your designs on it, starting with stickers and prints will be cheaper to produce than clothing. Starting with the stickers and prints makes sense before you start investing in clothing.
Once you start to get a return on your investment, you can reinvest your profit to expand your product line and grow your business. However, before you start expanding your business, make sure that you are in fact making a profit off of everything in your business.
Optimize Your Online Presence
Having a good online presence is important when you’re a new small business. Having a good website and consistent social media profiles will help prospective customers know the kind of business that you are running. You should try to optimize your website for search engines, which will help increase your organic traffic, which is what 61% of marketers say is their top inbound marketing priority. There are many resources online to learn about SEO and how you can help your business’s website.
When it comes to social media, make sure that you not only create accounts on all major social media accounts but promote those accounts on your personal accounts. This will help the people in your life know about the new business you’re starting and may even lead to them posting about it.
Starting a new business is an exciting venture to partake in, but making sure that you are being smart about your investment is key to its continued success. Make sure that you’re being smart about your money and you can help your business succeed for years to come.
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