If you have worked in a dead-end job for a number of years, or if you have a great idea that you feel would make for a successful business, you may want to become an entrepreneur. People have different reasons for wanting to go into business for themselves, but the common denominator is that it is expensive to start a new business. If you are not working full-time while trying to get your business idea off the ground, you may have difficulty making ends meet. Saeed Torbati shares the following financial planning tips for people who want to be their own boss.
Don’t Quit Your Day Job
Many people mistakenly believe that they should quit their day jobs right away when they start a new company. This is an unwise move because most new businesses do not turn a profit for a year or more. The new business will not have enough cash flow to support itself and its owner until it has been firmly established as a profitable company.
It is also a good idea for at least one partner in a marriage to stay in a job with good benefits. Paying for benefits as a small business owner or sole proprietor can be prohibitively expensive.
Consider All Your Funding Options
When you are securing funding for a new business, you may have to resort to personal loans in order to get your idea off the ground. Personal loans expose you to a great deal of financial risk. It is smart to look into other sources of funding as well. You may want to ask friends and family if they want to go in on the business with you.
Budget Wisely
When you are starting a small business, you will need to be extra careful with your money. You will need to economize on your monthly living expenses as much as possible. Stop eating out, buying unnecessary things, and going on expensive vacations.
Keep driving your old car as long as it is in an adequate state of repair. Pay down your high-interest credit card balances to the best of your ability. These money-saving tips will help you find more capital to put into your business.
Don’t Pay Yourself Yet
Wait until your business has firm profits before paying yourself a salary. You may need to pay employees, however, if your firm is not strictly a family business. You can live off your previous job’s earnings, or you can be supported by your spouse. Too many business owners make the mistake of dipping into company funds and rendering the company unable to perform its work.
Secure Solid Business Funding
In order to make your business successful, you will need to secure financing. Whether you go through a bank, individual investors, or a venture capital firm, you will need to present a full accounting of your business plan and your cash flow as well as projected profits. Getting outside funding sources for your business will help you save money on a personal level.
Competitive Bidding Process
When you are looking for suppliers and service providers for your business, you can save money by creating a competitive bidding process. Each business will then work to improve their offer as compared to their competitors.
Make Small Changes
One of the best ways to save money when you are starting a new business is to make small, concrete changes to your spending habits. As mentioned above, not eating out or taking expensive vacations can be a big help. Pack your lunch for work, cut back on children’s expensive activities like travel sports teams, and try to shop second-hand for such items as clothing and furniture.
Savings Changes
When you are planning to start a new business, you will need to save your own money to do so. No new business owner can get away with having an investor or bank fund the entire enterprise. You will need to start putting money away at least a few years before you want to start your business.
An easy way to begin saving is to take a certain amount of money out of your bank account from each paycheque and put it in savings automatically. This will cause you to budget around the money.
Saving for Your New Business
When you follow these 8 tips, you will have an easier time saving money for the launch of your new business. Above all, be sure that you live off your existing resources as much as possible. Do not put pressure on the business’s finances by taking out money for your own personal purposes. Saeed Torbati recognizes that financial discipline can be difficult but emphasizes the importance of treating your money with care.
