4 Financial Tips Every New Entrepreneur should Consider
To launch a company in the competitive business landscape means to put a hefty financial burden on your shoulders, and battle the tides until one day you establish solvency. Usually, this doesn’t happen before the third year from launch. This corporate limbo you will find yourself in is a time when you will need to tend to strict financial management, smart investing, and careful saving in order to keep the ship afloat. Let’s take you through the essential financial steps that will help you secure adequate financing and utilize your assets wisely in order to pave the road to a solvent future in the business world.
Build a realistic financial plan
Securing the investment capital, preserving assets, and managing finances all falls under the umbrella of financial management. Your financial plan will be the single most important document that will detail the ways you will finance your business, and thus allow you to effectuate your business plan to its fullest potential. Yes, even if you’re short on cash.
Always keep in mind that a lack of capital doesn’t necessarily have to prevent you from entering the market – it only means that you need to find ways of investing in your company. Luckily, there are plenty of financing options available to novice entrepreneurs, but you will need to build a strong financial plan in order to obtain them. By summarizing your current financial situation, improving your creditworthiness, and making sound financial projections for your market and business, you have a higher chance of appealing to investors or scoring favorable loans.
Invest in the bare necessities
When starting a new business or trying to get it on its feet, it’s important not to get ahead of yourself. Your capital needs to be divided into categories and allocated according to your company’s needs. This doesn’t mean splurging on the latest office equipment of buying all of the ad space on the web, but rather it means scaling slowly and per your realistic capabilities.
To put things in perspective, uncontrolled investments are the ones that don’t produce a direct return. This can be anything from paying a steep rent on your office when you could have gone for a cheaper space, to overpaying for inventory you’re not going to sell immediately. As an entrepreneur, you need to be smart with how you manage and save money, so invest slowly and gradually, making sure each investment counts.
Consider external financing solutions
Unless you have plenty of personal capital to invest in your new business venture, chances are that you are going to need outside assistance. While there are numerous financing options at your disposal, you will need to find the one that will help you scale safely, grow your business effectively, and provide long-term support until you reach financial stability.
External financing options fall into two categories: debt financing and equity financing. The former deals with financing solutions such as a business loan or applying for financing with institutional investors, while the latter deals with selling ownership of your company to investors in exchange for financial aid. One will allow you to remain the boss and is easy to raise, while the other will allow the stakeholders to steer the business with you.
Establish cash flow early on
Every new business owner would love nothing more than to see their sales percentages skyrocket from the get-go and start feeding into their operating capital. While clear-cut financial gain is still ways away, you at least want to cover your operating expenses and keep the cash flowing through your company.
To achieve this, you will need to create interest in your product before you actually invest in it, in order to prevent financial pitfalls. Focus on pre-launch marketing campaigns and incentivize potential customers to pre-order your products – this will not only secure financing for the product itself, but it will also allow you to build a product that will appeal to the exact tastes and preferences of your target demographic.
The biggest challenge for modern entrepreneurs is not creating a beautiful brand or a functional product, but rather building the financial foundation that will support the company on the way to long-term solvency. By implementing these essential tips into your business plan, you will have gained a comprehensive overview of your financial situation, and more importantly, you will have created a sound financing plan to pave the road to a prosperous future in the competitive business world.
Victor T. Miller, a Sydney-based business and marketing specialist who has expanded businesses over 5 years. I am a person who loves to inform people about the latest news in the marketing industry also as sharing tips and advice based on my professional experience and knowledge.