Starting a business is an exhilarating time. It can also be a very stressful and busy time. As a local business owner, you often end up wearing all of the hats (CEO, Accounting, HR, Marketing, etc.) in the beginning due to lack of funding early on.
In all honestly, this isn’t such a bad thing because it’s nice to know how things work and how all the pieces fit together if you’re the one running the business. At the same time, the goal is to be able to hire experts to handle other departments at some point in the future so you can focus on building and growing the business.
One very crucial factor in determining a new local business’ success or failure is the ability to plan for the businesses financial health. Many new businesses close within 1 to 5 years due to lack of funding and cash flow because they didn’t plan appropriately in the beginning.
Don’t let this happen to you.
Below are 3 initial, yet critical, steps to building a financially sound local business that’s here to stay for the long term.
- Plan it out, and think of every big and little detail and expense. Take some time to brainstorm and think of all the costs you’ll have associated with your new business. Consider your salary (and be reasonable), the salary of any employees you may have, overhead, and so on down to small office supplies like ink for the printer. And don’t forget items such as health insurance that can cost a large amount of money for businesses.
- Save up enough to live off of for 6 months to a year. When you launch a new business, it could mean you’ll go for a period of time with little to no income from that business. With that being said, try to save up as much as possible (many finance books will tell you to save up enough to live off of for an entire year) before you launch. The last thing you want is to have financial stress on top of the stress of starting a new local business, especially if you have a family.
- Maintain that budget. It’s exciting to get new business loans and be offered credit cards and other lines of credit for your new business. BUT, remember that these are all forms of debt, and you don’t want to get in too deep to the point that you have to fight your way out, or even worse, go bankrupt. Maintain your debt to income ratio and bottom line for your new business. You, your family, and your investors (if you have any), will thank you.
If you’re on the path to building a new local business, congratulations! Use these financial tips to get started off on the right foot, so you can build your business and still be working it for years to come.
About The Guest Author: Chris Marentis, founder and CEO of the Surefire Social Marketing System, is a recognized expert in the field of local business marketing leveraging website development, local search engine optimization and social media marketing to generate leads and brand local businesses throughout the digital web.
Ladder To Success Photo via Shutterstock