If you have decided to start up your own business it can be exciting as well as quite stressful at times. You should already have a business plan but you will also need a financial plan to make sure your business keeps on top of expenses as well as some revenue in case of any emergencies. Here are some of the most common financial issues entrepreneurs come across when starting out.
Underestimating Startup Costs
Most entrepreneurs will underestimate how much starting a business will actually cost. If you estimate higher costs, lower revenue and a longer time for profits to come in you may have a high figure that seems intimidating. But bankers and investors will aim to see a more realistic business plan. If you factor in all worst case scenarios you can only be pleasantly surprised. Entrepreneurs who borrow the amount they really need, no matter how large are more likely to survive and grow. Those who borrow less money than they actually need run out of money too soon and have to borrow more long term.
When starting your own business it is important to get your hands on as much funding as possible. If you can get a large sum of funding when things don’t go to plan you will still have some financial cushion. Even if you are selling products you may have a while to wait until your customers or clients make a payment which is why many take advantage of SMB factoring services. There are many different routes you can pursue if you need to fund your start-up from bank loans to private investors. If your business is generating revenue but is struggling to stretch money for expenses some months you can take a look at fixed term installment loans to see you through.
New business owners tend to underestimate their monthly outgoings and this can cause problems down the line. Although many entrepreneurs remember obvious expenses it is easy to forget hidden costs of running a business like equipment, employees’ wages and possible benefits, licenses and even insurance. The best way to combat this is to keep on top of all your business needs and how much they might cost. Be straightforward with vendors and suppliers and ask what discounts they are willing to offer. Get advice from people in your line of business who aren’t directly your competitors as they will be able to shed light on hidden expenses, monthly spending, and start-up costs.
New business owners can often price their products or services by adding up costs and then adding on the margin they would like to make. This approach can cause problems as it may be a great deal different from the real value of the product within the market. Make sure to price your items that are to their true value. Take in to consideration what you want to offer customers and clients is it low-cost, mass-market products, or high-end niche ones. Ensure you check your competitor’s prices and services as you don’t want to miss out on potential customers.
Not Factoring In Your Own Salary
If you have decided to start your own business, although you may not have a wage to begin with you will need to factor your wage into your financial plan. Most entrepreneurs choose not to have a wage for a while but remember to set a target of paying yourself within the first year. When you set a target for your wage it is important you include this into your financial plan so every bit of money is being accounted for.
Ready to Start a Business?
Now that you have an idea as to what it takes to financially prepare to start a business, why not get inspired and start your own. There are lots of on-line businesses that you can start and 10 Places to Find Online business ideas is a great place to start. Good luck!