Starting a new business is a hard task. There are plenty of raw beginners who want to employ some top financial hacks of successful entrepreneurs so that they can kick-start their business successfully. On the other hand, there are established entrepreneurs who have their feet on the ground and need some financial guidance that will make them earn more profit without taking any stress. Therefore, the below list of top 5 financial hacks for new entrepreneurs is what you should read if you want to start your own business.
Stay on top of cash flow and spending
New entrepreneurs spend a lot of time thinking about their product or service. They run market research, put together a business plan and build a great team. But the hard truth is that most businesses fail because they run out of money.
If you're starting your own company, make sure to stay on top of your cash flow — the money going in and out of your business. Keep an eye on your budget and know how much money you need to survive each month.
"Cash is king," says Eric Holtzclaw, author of Laddering: Unlocking the Potential of Consumer Behavior. "You have to have it to survive."
Here are some strategies for ensuring that your business has enough cash in the bank:
Keep track of spending. One way to do this is by using accounting software such as FreshBooks or QuickBooks. These programs let you monitor expenses and send invoices to clients so you can get paid quickly.
Find ways to save money. Minimize costs wherever possible, whether it's buying furniture from a used office supply store or getting free marketing materials from Vistaprint if you're just starting out. You can also try negotiating with vendors for discounts on supplies or services.
Get preapproved for a small business loan before you immediately begin spending your current cash flow. This will give you a cushion in the beginning which will prompt success down the road.
Separate your money
A lot of entrepreneurs are so consumed by their business that they lose sight of what's going on with their personal finances. This can be a very dangerous thing.
Here are some basic money management tips for new entrepreneurs:
Separate your money. Your business is a different entity from you, and the money it makes is not your money (at least not until it's distributed to you as income). To make sure you have a clear understanding of what's going on with your business, set up a separate checking account for your company. Use this account only for business expenses and don't commingle personal and business funds. If you're doing business as an LLC or corporation, this is important to protect yourself from potential lawsuits.
Set aside reserves. New businesses often have irregular cash flow, but you need to set aside enough money to cover your living expenses until the next paycheck comes in. Ideally, build up a reserve large enough that you can live off that income for at least six months without having to touch the capital in your business account.
Be SMART. Set goals
Simple, Measurable, Achievable, Realistic and Timely. No matter what your financial goal is — whether it's saving up enough money to start a company or getting out of debt — break it down into smaller steps so it's easier to manage. For example, if you're trying to get out of debt, set milestones for paying off different credit cards or loans. If you're trying to save up for something specific like a new laptop or marketing campaign, figure out how much you need to save every week or month to reach that goal by a certain time.
Time is money
As an entrepreneur, you're probably used to following a budget. It's no different when it comes to your time.
Paying attention to how you spend your time is crucial if you want to succeed in business.
Your new customers are also your new boss. You don't want to take on too many clients at once, and then find yourself unable to do justice to the work you've taken on.
At the same time, you may need to take on more customers than you'd like in order to grow your business – but those extra customers should be paying off eventually, and not just taking up all of your time.
Not only is this a good way of working out what makes money, and what doesn't, it'll help inform the decisions you make about whether or not to spend extra money on promotional activities.
Continue learning and consult financial professionals
Read up on finance. One of the most valuable things you can do is educate yourself on how to manage your finances. There's no shortage of books and websites devoted to personal finance, but if you want information that’s specifically relevant to entrepreneurs, I recommend reading Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist by Brad Feld and Jason Mendelson. The book is written by two prominent venture capitalists, and it provides a wealth of information about what investors are looking for in entrepreneurs.
Consult with financial services professionals. As an entrepreneur, you're probably going to need some legal advice while setting up your business, especially if you're securing investments. While there are plenty of free resources online, it's important to consult with a lawyer or other professional who can walk you through the process step-by-step, advise you on the best structure for your company and ensure that you're following the rules to best support your financial endeavors.
So even if you don't have an MBA, a web developer, or access to venture capital, money is still something that you should think about as a budding entrepreneur. And fortunately, there are numerous ways to make the most of your financial resources. What's more, you don't need to be an accountant or savvy businessperson to understand financial "hacks." Simply put, if you ask yourself the right questions before making a decision, you can save yourself money and trouble in the future.