The money you need to fund your new business has been granted – so, congratulations! But how would you spend this money? As a smart entrepreneur who wants his business to endure its critical early years, it is imperative that you act maturely and trail the spending schedule or outline it in your business plan.
How business owners should be spending their money is the most significant decision faced by all entrepreneurs, particularly at the startup stage of their various businesses. Fiscal responsibility is not what some of the great leaders out there are born with, but it’s rather learned by trial and error.
Here’s is my take on how wise business owners should be spending their money:
Table of Contents
Make a Must-Have List
Running a business with either a generally poor fiscal management or insufficient funds is one of the most common mistakes any failed business can commit. Try to prepare a list of absolute must-haves that your business cannot survive without such as a customer service/branding, legal advice, tech support, and a competent accountant or CFO, in order to fight this fatal error.
Don’t Engage in any Accidental Spending
It can be very overwhelming to engage in accidental spending as soon as funding comes through. It is mandatory that you tackle these urges and make sure you only spend on whatever you really need in your business at a particular point in time alone.
As a responsible entrepreneur, take a while to look back and evaluate your business plan to know what you need to keep the business moving. The information will take you back to the spending tactic you designed to get your company progressing. Look at your cash flow foretell closely in order for you to spend wisely.
Where to Avoid Spending:
Before you embark on buying any of the highlighted items below, make sure you revisit your business plan to establish their suitability and fitness in the parameters set for both your financing and budget.
- Pricey printing costs
- Expensive lunches and business trips
- Needless overpriced clothing
- Luxurious equipment
- Fancy furniture and office space
Are these fundamental to your business? Try to use that extra bedroom in your apartment as an office if you want to be cost-effective in this area. As a replacement for buying costly printers and copy machines, avail print services at a local library. Buy or borrow a smart blazer from a friend or local tailor in case you need a suit to astonish potential customers.
On the other hand, seek a creative spot with a smaller price if all you want is a physical location for your clients to visit. You can always upgrade and improve on all these items when your business begins to generate income.
Evaluate Your Technology Needs
You’re going to be putting a lot of money into your business so you want to be sure you’re spending it wisely. One of the most important things in your business should be safety–you want all of your data to be protected in an emergency situation. This is possible through security software which will protect your company from attacks.
Spend Minimal on Staff
Strong and amiable staff is the backbone of any great and successful business. Nearly all businesses just need one or two crucial staff members at the initial stage of the business while some require no one other than the owner.
Outsourcing to experienced family, friends, and professionals at a business startup frees the money that would be used for salaries, and can serve as a shock absorber for unanticipated expenses. Additionally, you may turn to software for some of your tedious tasks.
You can save a lot of time by switching to inventory software or procure to pay software. It does all of the work for you and is less expensive in the long run. As the business grows, hiring new staff members may become necessary, but it is essential that you should go ahead only if it makes financial sense to do so.
Have a Backup Plan
The goal of all new businesses is to get to the breakeven point in their first financial or fiscal year. This critical measure means that profits are equivalent to or the same as expenses and upfront capital investment. Therefore, always be ready when you’re allocating funding and profits.
Having access to some backup funds or savings can be critical if a business failed to breakeven at the end of the year. However, there are some companies that don’t attain their break even point until their second or even third year of operation. Hence, take note and get ready for this.
As a wise entrepreneur, always spend what is left after saving, instead of saving what is left after spending. In the long run, smart fiscal choices ensure success. In order to keep your business afloat, particularly when you don’t have sufficient fund to run the business, there are different loan opportunities you can consider as financial backup.
Don’t forget the fact that your business plan is your plan and your roadmap to profitability. Referring to and following it strictly will help you to establish if you can afford to entertain additional debt for the long-standing health of your business.
Stick to the Basics
Making use of your business plan as a living document will go a long way in guiding staff and financial decisions. You should also be depending on your own data as well as profit and loss projections.
Getting financing for your business is an exciting accomplishment, and financial planning can actually be the deciding factor between operating a successful business that will be in operation for many years to come. To attain this fit, spend judiciously and always be ready for the unforeseen.