Starting a business is all about being independent, calling your own shots, and following your dreams.
But, it’s also about being responsible, and that means getting a tight grip on your new company’s budget.
For most people, learning how to stick to a budget does not come naturally, they have to work at it.
Here are some smart money tips that will help your new business thrive.
1. Make a Strict Budget and Stick to It
Just like running a household, a business needs to stick to a budget to be successful. Your budget may change as your business grows but creating a budget right from the beginning and sticking to it will help you to form good habits that will only benefit you down the road. It will also help you to resist impulsive purchases that your new business just can’t afford.
2. Organize Your Financial Records Immediately
It may not seem like you have much to keep track of at first, but when you’re getting started you should get into the habit of keeping track of everything. That way, when your business starts to take off, you will already have your bookkeeping systems in place and be in the habit of using them.
3. Take Advantage of Any and All Free Software
Many business operations are accomplished with software, and there are a lot of surprisingly good options out there that are free or inexpensive. Check out Download.com for tools to help with things like shipping and invoicing without making a big dent in your budget.
4. Establish an Emergency Fund for Your Business
Every business goes through ups and downs. Start an emergency fund as early as possible and contribute to it regularly to make sure you can get through the low times.
5. Don’t Neglect Your Personal Finances
You’ve probably been dreaming of starting your new business for years, so it’s easy to see why you would want to pour everything you have into it, and of course, you should, as long as you’re not putting your personal finances in jeopardy. Make sure you have an emergency fund to fall back on for things like your home mortgage and set up a retirement account and some kind of health coverage as well.
6. Start by Purchasing Only the Necessities
When your new business is just getting off the ground, you need to be especially careful about how you spend your money. Every item you purchase should be an absolute necessity. Do you really need that brand-new desk, or will a desk you already have work for now? Successful business owners know that you don’t start out with luxury purchases. You start out by purchasing only what you need to do business and nothing more.
7. Know What Your Liabilities Are
Successful business owners know what each one of their financial liabilities are. It would be great if things stayed perfect all the time, but that’s not realistic. There will be times when your business struggles. You need to know exactly what your liabilities are in order to avoid legal trouble.
8. Set Aside Money for Taxes Each Month
There’s nothing like a great big surprise tax payment to sink your business, especially if you have not been setting money aside. Don’t be one of those businesses that has to scramble around at the end of the year trying to come up with enough money to pay their taxes. And, paying late is not an option because late fees and penalties can add up fast. Most tax professionals recommend following a budget and saving a fixed amount each month to pay your end-of-year tax bill.
9. Be Careful of Hidden Expenses
Scrutinize your books regularly to find unnecessary expenses that can affect your bottom line. Makes sure that every penny you are spending is truly necessary.
For example, could you switch to a cheaper cell phone plan? Have you shopped around to see if other vendors can give you a better price on the products and services you use? Have you considered buying your office equipment used to save money? Do you really need that full-time employee, or could you outsource some tasks to freelancers and independent contractors to save money on things like payroll taxes and insurance? For example, utilizing outsourced accounting services for startups can save you a ton of money over a full-time accountant.
10. Put Your Cash into Interest Bearing Accounts
It’s tempting to reinvest everything you can back into the business, but when you’re first starting out, sometimes it’s better to put your money into interest-bearing accounts while you evaluate whether or not it’s the right time to expand the business. That way, your money can be earning interest while you decide what your next steps will be.
11. Hire Your First Employees Strategically
It may be tempting to rush out and hire the most highly qualified employees you can find, but experienced employees come with a higher price tag. For new businesses, a better strategy is to hire employees with moderate, but efficient, skills. Usually, when you’re just starting out you won’t have complicated tasks that require the best experts in the field.
Hiring fresh individuals from school who know the basics and are eager to learn will better suit your business. This is another area where hiring independent contractors can be a good idea, too, because you only have to pay them when you need them.
12. Barter for Things You Need
Thousands of years ago, the world’s economy was based on a system of bartering for goods and services. Today, we rely on purchasing goods and services with money, but it doesn’t have to be that way. You won’t be able to barter for everything, but it’s worth looking into it if your budget is extremely tight. Internet companies like Business Barter Unlimited and U-Exchange Business are making it easier for businesses to make valuable trades for goods and services with other businesses.
13. Take Advantage of Free Marketing Strategies
Paid advertising, like radio and TV ads, can be out of reach for many startups. Save money on marketing by utilizing social media and word-of-mouth referrals. Do your own social media updates or have a social media savvy employee do them. Encouraging your customers to leave online reviews can also be a great way to bring in new customers.
Being a successful business owner requires a lot of dedication and commitment. By implementing smart financial strategies right from the first day, you can significantly improve the chances that your business will remain successful in the long run.
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