After months of preparation and planning, you’ve started your business. It’s an exciting adventure and steep learning curve that has the potential to be incredibly rewarding – when done right.
In Australia, a staggering 60% of small businesses fail within the first three years.
With a balance of good marketing research, a high-quality product on offer, and an innovative business idea in hand, you may think that you are within the 40%. However, without strategic money management and planning, you could still fall short.
Starting a business from scratch is an investment that you have to know you can afford. The key to success is knowing exactly how much risk you are taking by doing so. Let’s look into some of the basics to get you started.
Budget Smart
Before you even think of kickstarting your business, you need a budget.
A smart budget will look at the costs of having a business for 1 month, 1 year, and 5 years. You can start by estimating the costs of material things, then look into employees and growth. Your business plan and your budget plan should work in unison.
Once you have established this clearly, look into ways that you may be able to cut costs without reducing the quality of your product.
You can add in any predicted changes that you might encounter, such as inflation, or even a global pandemic to prepare for any losses or hurdles that you may need to overcome. This can be as simple and effective as knowing what your cash reserve will be if it happens.
Book-Keeping
This is an old-fashioned phrase, but take it as a sign that it’s something you must do!
Book-keeping does not necessarily have to be in a book. When you first start your business, you have to get into the practice of keeping a log of all your incomings and out-goings of your daily business. In the future, when you are successful, you’ll need it for your BAS (business activity statement) to demonstrate how you are making money.
Keep all of your invoices and receipts in a safe place and document any business-related purchases. Your personal purchases should be kept separate. This way, you can monitor the ongoings of your business clearly, when it comes to it, you’ll be able to see exactly where you are going wrong if you need to.
Time is Everything
From choosing when to start your business to upgrading your old laptop – timing is everything. Create a calendar of significant dates such as bill payments, taxes, and predicted slow income periods will help you to prepare for any shortcomings.
Seeing the ups and downs of your business will help you to map out your year and predict the best times to make investments. Then, you can use your time wisely and make alternations to your business plan without affecting your product.
Planning and managing how you handle your business’s money well can be the difference between being in the 60% of failed businesses or not. By establishing ground rules and reviewing your account regularly, you’ll clearly see how to make wise and financially informed decisions.
