Your inflows must be greater than your outflows when it comes to your startup finances. One would think that would be up there with the team scoring more points winning the game. This is a fact of life, something understood from the get-go, right?
Not so fast.
There are umpteen million blogs posts instructing you to develop a good idea, have passion, and get to work. Everyone comes up with a good idea at least once. Blind squirrels do find nuts and all of that. I think a lot of this is fallout from everyone-gets-a-trophy syndrome. If I just compete or look the part, then I’ll win. Nasty stuff.
Passion, Good Ideas & Hard Work Don’t Pay the Bills
I have passion about a number of things but that alone doesn’t guarantee income. I’m really passionate about yelling at the TV when my Gamecocks make mistakes. If only I could get payment for those services rendered! My wife may even concede a good idea or two manifested at some point. I’m pretty good at hard work, as the large pile of cut up old bushes currently in front of my home demonstrate. I’m not here to be negative Nancy, I just happen to be a realist.
When it comes to operating a business, there are some other things to consider that are even more important. Like money. And like it or not, you’re in the business to make the green stuff. As a business, it is your lifeblood. The whole shebang won’t work unless it’s coming in at least at the level to pay employees and bills. Even if you are a solopreneur, you must eat.
Startup can be a time where unbridled passion and excitement can quickly give way to unmitigated doldrums and mistakes.
So start your business strong.
Here are five quick hits for your business startup when it comes to finances.
The Five Financial Keys to Startup
- Create a budget. Business is a lot like personal finance. You cannot understand where the money will go until you write it down. That fact grows exponentially important when you begin to spend money that you cannot quickly recoup. Starting up a brick-and-mortar store? Overhead, internet, utilities, and local advertisements might be a larger bucket than you think. Even if you’re a blogger on starting out on WordPress, those shiny one-off plugins will add up. You are only alive as a business when you have enough cash to pay the bills. Savings early on might mean the difference a few unexpected lean months later. And you cannot reign in excessive spending if you don’t know where the money is flowing.
- Know your input costs. Exactly how much does it cost you to deliver your product or service? I would expect a quick answer to that question. If you’re just beginning your business journey, remember that time is one of the most precious resources and largest costs you possess. If you plan to pay an employee, the costs are more obvious. However, when you wear the solopreneur hat, all sorts of activities will eat at your time…aka your budget. While your rates might seem pretty good, do they pay for the other little things like bookkeeping, accounts payable, and so on? These components will deduct from your time performing your core competency. In other words, they will cost you because that’s less time serving customers and receiving payments.
- Plan for the unexpected… or save money. This is one that people will scoff at because it can seem like shoestring budgets are sexier and almost required in entrepreneurship. Build yourself a cushion by taking the savings from cost cutting measures and banking it or devote a percentage of your budget or startup funding. Come up with a way to plan for a rainy day, because it will rain at some point.
- Limit your fixed expenses. This one should be another obvious entry, but it’s here for a reason. Closely examine where you plan to spend your money in that budget. Do you really need that shiny new toy or could you go used and upgrade later? At this point, the question you should be answering about a purchase is will it help you make money? If you don’t need it now, don’t lock yourself in. Consider the next quick hit and maybe do it first and then reward your success with an upgrade.
- Set clear, thoughtful goals. It is as simple as writing things down. Goals empower us by creating clarity. They give us something to attack or achieve. Well thought out goals will provide waypoints for success. And these do not only indicate success, but they can provide a needed psychological boost. Everyone likes to meet a goal or cross something off the list. It’s all about confidence. Specific and measurable goals will create momentum by moving you into greater and greater success as they are reached.
Startup Financial Success Tips Cannot Be Ignored
Being an entrepreneur is all about passion. It’s also all about good ideas and hard work. None of these things alone will pay the bills or make you money. So stop treating your business’ wallet like most treat their wallets. It’s not something to ignore or even be afraid of.
With steps like budgeting, input cost knowledge, savings, limiting expenses and setting goals, you will know that your money is helping your business to grow.