When it comes to your business, you want to make the best possible choices that will end in the greatest results. No one wants a financial nightmare to sort through; however, it can be tough to avoid mistakes when the workload is overwhelming. Thankfully, you’re not alone and the learning experiences of others will help your business stay afloat.
It is important to first separate your personal and professional finances. If you are an entrepreneur looking to start your own business, don’t use a personal credit card. Why? If you are unable to pay off your personal card balance, it will start hurting your own credit score. If your credit score lowers, it will affect all your financial transactions, both business and personal.
It also matters when it comes to keeping financial records. You’re at risk of devaluing your business by increasing your perceived expenses and thereby reducing your profit margin. Also, improper personal use of business finances can potentially get you into hot water with the IRS, so do yourself a favor by separating everything in the beginning when it comes to your business and personal finances. This might mean you will have to live on a modest salary to keep above water, but it will pay off later.
Keep in mind that just because people are talking about your business doesn’t mean you are successful and growing. This doesn’t portray an accurate business forecast, even if it does serve as a confidence booster. Balancing sales figures with your expenses, profit margin, and average revenue per customer is a finite way to discover to what degree your business is succeeding.
I promise you won’t seem cynical by planning for the worst. Your boundless optimism is wonderful and you need to it make a good business. But you also have to cover your bases and look to the future. Remember, you want to avoid financial nightmares-not wait for them and then figure it out. Plan for possible financial hiccups so that you will be prepared to handle it and thus move away from it faster.
It is recommended to pad your budget with a 10 percent contingency fund. No matter your estimated annual budget, that 10 percent will be there from the start. Better to have it and not need it than the other way around.
Do you have liability insurance? If you’re operating out of your house, the standard homeowner’s insurance policy won’t likely cover your business, especially if your business owns expensive equipment. Insure your business properly and sleep easier at night.
Don’t fall into a financial pothole, especially after you’ve been previously warned. Research and learn, ask others for advice and make sure you understand the full scope of your financial requirements.
Do you feel like you need advice? Make arrangements to speak for free with one of our qualified and experienced franchise consultants. FranNet is a franchise consultant company with a great track record of assisting individuals on their path to business ownership.