Deciding to pursue your entrepreneurial dreams is an exciting professional milestone. Quitting a full-time job to escape the corporate world or use your creativity to make a difference comes with great emotional, as well as financial, risk though. Entrepreneurs may have all of the ambition, drive, education and intelligence to launch a startup, but without smart financial decision making, it could all dissolve in an instant.
Consider the following overview for building a strong monetary foundation for starting and growing your business.
Invest in Budget Plans
Without a financial plan in your control, prepare to fail. “Business budgeting is one of the most powerful financial tools available to any small business owner,” says Entrepreneur Media Inc. With that in mind, Entrepreneur recommends establishing these two types of budgets:
- Short-term, month-to-month plan for one year
- Long-term, quarter-to-quarter plan for at least three years
These budgets provide financial reporting for analyzing income statements, cash flow needs, potential capital/operating expenditures, sales numbers, accounts receivable/payable, inventory, bank loans, etc. Entrepreneur lists questions to ask to help get you started, while FinancesOnline.com breaks down popular budgeting software as a guide; however, don’t hesitate to meet with a CPA to ensure your plan won’t leave you in financial devastation.
Build Relationships, Foster Connections
As an entrepreneur, you’re a self-starter, motivated and driven to make things happen independently according to your vision. But there are times that require reaching out. It’s OK to ask for help. Connections can be your most affordable resource. Establish a referral network to draw awareness to your brand and potentially bring in new leads. You can partner with professionals in your field in exchange for free services, but be prepared to offer something in return. For example, if you’re a freelance writer, you can provide Web developer content in exchange for a revamped website.
Stay in Communication
Reliable means of communication are paramount to entrepreneurs. You need to be available and responsive. And for entrepreneurs, that may mean 24/7. It’s worthwhile to take the time to research the most affordable cell phone plans that meet your business (and financial) needs. T-Mobile offers limited-time plans with benefits like two unlimited lines (ideal for a business partner or assistant). This type of plan ensures 100 percent connectivity with Mobile Hotpot data, fast and double 4G LTE network and an international line for any pursuits that take you abroad.
Focus on Your Cash Flow
One of the best things you can do while launching a business is not run out of money. It starts with being smart about spending capital and making accurate cash flow projections. Use profit and your break-even point as benchmarks and have cash reserves for shortfalls. You’ll also want to collect receivables and invoices as quickly as possible or even offer discounts for early payment. Meanwhile, negotiate to see how much you can extend your payables to vendors. Spend only on necessary expenses, minimizing spending until you have a healthy profit. If you manually create your own cash flow spreadsheet, save it to the cloud where it will be secure and easily accessible from anywhere.
Practice Healthy Personal Finance Habits
If you practice good financial habits personally, then you’re likely to mimic those same habits professionally. These include building substantial savings in case of a personal or professional financial crisis. Remember, keep profit separate from your personal expenses and allot new capital toward gaining new earning potential.
Your credit score may also strongly affect your ability to secure a loan or financing. QuickBooks Intuit Center recommends submitting a letter with the loan application illustrating any shortcomings and plans to prevent another incident. Quickbooks Intuit further provides information about common types of lenders and their requirements on personal credit; a bank or another formal lending institution may be the best place to start though.