Most people dream of owning their own business. What keeps many from pursuing this is the fear of confirming the negative statistics that go along with it. Not even half of the entrepreneurs that push forward with starting a business are successful. In fact, most fail after 2 years of trying. One of the biggest reasons for this is poor money management.
How can you avoid poor money management in your business?
Develop a business plan.
Everyone needs a way to measure their progress. This is the purpose behind a business plan. It is also a way to attract potential investors as well as convincing potential business partners and employees to believe in your vision. For a business to be successful, a plan also functions as a way to determine the best efforts in marketing strategies and other operational milestones. Within these milestones, financial expectations should also be incorporated. These points help you anticipate how much you will be starting with, working with throughout, and will have in the future. Projects can easily be derived from a plan to help keep you on schedule when it comes to your milestones.
Keep your personal and professional accounts separate.
The biggest mistake anyone can make is to merge personal and business financials into one account. When it comes to income that has been generated from your business, you have to keep them apart from leisure spending. This is because as a business owner, entrepreneur, etc., you are expected to file a 1099 on every penny earned. Mixing business with pleasure can certainly become confusing and an unnecessary headache that could have been avoided by keeping both types of accounts apart.
Be ready for tax liability.
As an employee, you don’t have to worry about taxes because they have already been deducted from your gross income. Consider this when you yourself become the business owner. Now you will be the individual that has to set aside money for taxes when it comes the time to pay up. Some businesses prefer to do it quarterly versus close to tax season.
Establish a rainy day fund.
In life, things happen. You should always have a rainy day fund to hold you in case the unexpected shows up on your doorstep. Many hesitate to create this type of safeguard. This is especially true at the start of a business because potential business owners are too busy searching for startup investors. A “just in case” is far from their minds. That being said, it is always good to incorporate a savings fund for your business into your initial costs, and part of your business plan.
Don’t be afraid to go into debt.
This sounds like bad advice, but it’s quite the contrary when it comes to starting your own business. Because of the amount of expenses a new business will accrue, taking out a loan for the necessary amount will ensure your business is not in the red. And with an appropriate business plan set in place, it’s not difficult to ensure that the loan you take out will be paid.