Starting a new business is an exciting time, but it’s also crucial to have a solid financial plan in place. According to a poll conducted by Start-Up-ASmall-Business.com, 46.84% of respondents feel overwhelmed by the process of starting up a business because of financial concerns. Lack of capital is one of the key reasons for small business failure. Before you dive into the process of starting a new business, it is important to start planning out finances first. Financial planning is the key to success for any new business, and it’s essential to have a clear understanding of your budget and expenses from the very beginning. If you’re starting a new business and don’t have a financial plan in place, now is the time to start.
At Number Crunchers®️ we understand the importance of financial planning and have helped numerous businesses with their financial needs. This is why we have written down some information about the essential steps you need to take to get your financial plan in place and ensure the success of your new business.
1. Keep your job!
One of the biggest mistakes many prospective business owners make when they start a new business is that they stop working at their current job. You become so excited about your new business idea that you want to spend all of your waking moments working on it and decide to give notice at your job. That is not a wise move—especially if you don’t yet have enough money to start the business properly. Keep your job for the time being, cut your expenses, save up money, and budget your time more wisely. Discipline yourself at your current job now so that you can transition into owning your own business full-time one day in the future.
2. Figure out how much you need first
Before spending one dime on your new business venture, you need to know exactly how much you need to launch the idea and sustain it for at least one to two years. As you’re learning more and more about how to start and advertise your business, the temptation is there to jump right in and get started right away. But before you make a move, create a business plan (at the very least, a short business plan) that outlines a complete budget and financial projections. If you rush to start spending money now without a view of the bigger picture, you risk throwing money into a black hole. For instance, say you spend money on advertising the product today and then learn later that you need a special license that costs thousands of dollars and requires a long wait. You not only lost the money on rushed advertising but may have to put the entire business on hold.
3. Get some start-up cash
There are a number of sources you can look to for start-up cash when launching a new business. Consult with your financial advisor before making any decision involving your personal finances.
Here are a few options:
Savings: If you’ve been putting money away for a rainy day, starting a viable business just might be the reason to put that cash to good use. Though it is extremely risky, some people choose to borrow from a 401K or other retirement accounts to get things rolling.
Home equity: If your home has equity (value), you can ask your bank about a home equity loan to help fund your business start-up.
Loans: The other possibility is to seek a loan from a bank. If you’re denied a bank loan, you can apply for a Small Business Association (SBA) backed loan.
Credit cards: Though it is a very risky proposition (and comes with a very expensive interest rate), some people choose to use credit cards to fund a new business.
Microloans: Some community organizations offer special microloan programs that lend low-income people or people with collateral issues cash to start a business. Ask your local chamber of commerce or Small Business Development Center about Community Development Financial Institutions (CDFIs).
Family and friends:
If you have supportive family and friends, ask them for assistance. Approach them like you would an investment club—present them with your business plan, the proposed amount you’re asking from each of them for an investment (even if it is just $100), and the benefits they can look forward to if the business is successful. Give them a deadline to make a decision and be open to questions and concerns.
5. Avoid potential pitfalls
Every dollar you spend to fund your new business idea should be mapped out well. Do not make rushed purchases, especially if the purchase is out of your budget. When considering a purchase for your new business, sleep on it for at least one or two nights before spending the money. Consult with one or two financially responsible, trusted friends before you make any large purchase that could make or break your business. Bounce your ideas off of a business mentor whenever possible—score.org offers a database of business veterans who are willing to act as mentors to newbie entrepreneurs.
If you are looking for accountants and bookkeepers in Surrey, BC, reach out to us at Number Crunchers®️. We help you to work on your business, not in it. We provide you with the information you need to keep your finger on the pulse of your business. With Number us, you hire a professional at the start to ensure all your bookkeeping needs will be completed properly and on time, with your investment more than offset by the time you can now spend with clients and family. We specialize in helping creative professionals as they. Our qualified and experienced staff has, on average, over fifteen years of experience in the areas of bookkeeping/accounting.
We offer services like bookkeeping, taxes, management reporting, business setup, etc., to clients across Surrey, Burnaby, Delta, White Rock, Langley, Abbotsford, Coquitlam, Port Coquitlam, Maple Ridge, Mission, Vancouver, North Vancouver, West Vancouver, and the surrounding areas.