4 Smart Money Management Tips for New Small Business Owners
The hard work of building a company isn’t always as glamorous as it sounds. Small business owners are faced with a number of tough financial decisions in the early stages of growing a company, especially when it comes to finding funding and building a sustainable business model.
Without reliable revenue streams to fund their endeavors, small business owners are often forced to get creative and use money management to support your business until it is able to stand on its own.
Looking for ways to make life easier for yourself as a small business owner? Consider these money management tips for launching a new business.
1. Manage cash flow to keep your business from being in the red
Lack of cash flow is one of the most likely reasons a business will fail in the early phases of operation. Starting and running a business costs money—but when you’re just getting started, that money likely needs to come from other sources.
Regardless of the source of this revenue, track your spending and balance it against your incoming funds to make sure your cash flow is covering costs and keeping your company up and running. If expenses overtake funding and your bank account runs dry, it could spell the end of your business.
Managing cash flow requires a combination of keeping spending under control and making sure you have enough funding to support whatever business operations are necessary. As the leader of a business, you’ll have to make careful decisions. Cash flow—or the lack thereof—will be a constant consideration in the early days of starting a business.
2. Separate your business finances
Don’t wait until you’re generating revenue to create a separate bank account for your business. Mixing personal and business spending makes it difficult to see how much money your business actually has.
Create a business checking account and use it for all business expenses, large and small. By creating a dedicated space for company money, you will make it easier to manage cash flow and keep an eye on your company’s financial health.
3. Minimize your overhead and fixed expenses
Before you commit to large business expenses, make sure you have the revenue and/or funding to support those costs. One way to stay lean and nimble as an organization is to avoid expenses that bring large, fixed costs to your business.
This includes expenses such as office space, office equipment, and even new hires. When you add fixed costs, you increase the minimum amount of revenue required just to break even. Consider the cost savings of using co-working spaces or continuing to run the business out of your basement. Hold off on full-time hires and opt for contract workers until you’re in a more stable financial place.
The less spending you’re locked into, the sooner you’ll be able to bring your business into the black.
4. Choose the right kinds of debt to grow your business
In the quest to acquire funding for your business, you might consider small business loans or other forms of debt to provide the financial boost that will allow your business to grow. But different loans and types of business capital come with different obligations and hidden costs.
Small business loans vary in terms of interest rates and repayment terms offered. Look for a loan that offers a low interest rate and a repayment timeline that fits your business plans.
Additional financial support could come from investors and other private sources of funds. Do your investors have skills that can support your business? If not, you might be better off seeking money from lenders who have additional resources to offer.
Strong money management tips and financing skills will help any small business owner navigate the early fiscal challenges of starting a business. Have questions about setting up banking for your small business? Check out the guide below or get in touch with an expert on our team.