Being your own boss takes courage and smarts. A great idea, a different way of doing things, a gap in the market – the catalyst for starting your own business might be driven by financial gain and independence and for those who get it right, the profits can be rewarding.
It’s a big step going out there on your own and unfortunately, many new businesses fail due to ‘inadequate cash flow or high cash use’, as well as ‘poor management’. Here are six great money habits that can help you manage your finances in the early years of building your business.
1. Set financial goals
Goal setting with near and long-term objectives can direct and motivate your daily, quarterly, and yearly activity, in line with your overall business growth targets. Rank your goals in order of time and priority, and track your progress against your own KPIs to measure success. It doesn’t have to be complicated; a simple spreadsheet will suffice.
2. Get to know your cash flow
In an ideal world, you’d pay your staff, bills, materials and invoices after you’d received payment from your clients – unfortunately, such a perfect balance of money coming in and out rarely happens!
You need to forecast so that at any point in time you have the cash to run your business. Once you’ve done your monthly budget, it may become clear that some months you may make a loss. Account for those period of times in the red by setting aside funds to meet your expenses during months with negative cash flow.
3.Invest in yourself, your staff, and your business
Investing in your business is crucial for future success. Equipment, education and courses, attending business events and marketing/advertising for example, all require an up-front investment, but present a greater opportunity for your business overall.
4. Decipher between needs and wants
We’ve all got an idea of our perfect business set up, but the reality is that “needs” have to come before “wants” and compromise is a big part of a business’ early years. This doesn’t mean compromising forever though. Consider the short-term loss with the long-term gain, and weigh up the best course of investment.
5.Pay off loans strategically
Starting and running a business isn’t cheap – it’s likely you’ve taken out a loan or are considering debt finance as a strategy to set yourself up. Having a strategy or plan to reduce debt is important and can place your business in a better financial position.
6. Protect your income
Your business relies on your hard work and presence to be successful. An illness or accident that takes you out of action and stops you from being able to earn an income could have lasting effects on your finances as the bills won’t stop coming in. In the absence of workers’ compensation or sick leave entitlements for the self-employed, income protection insurance can make it possible for you to meet your personal financial obligations.
Managing finances is an inevitable part of business ownership. The team at Adroit can provide risk advice on policies best suited to your needs, as well as help you with the application process.
Call us on 1300 MY ADROIT to find out more about Income Protection Insurance today.