There are so many things that go into a starting a new business that make it both exciting and scary all at once. So many different problems that require solutions and you are finally the one who gets to call all of the shots.
But unless you come with deep pockets, your startup will need you to be sharp and shrewd with your money. Wasting funds in any portion of the business just puts you that much closer to closing the doors and calling it a failure.
This includes knowing what to do with the capital that you have and how to best allocate it. You may not be able to run the perfect business, but knowing what to do with your capital can give you a leg up on the competition and establish a foundation for future success that others could only dream of.
Keep Fixed Expenses Low
Simply put, expenses include everything that keeps your gross revenue from going into your pocket. Try to plan larger expenses ahead of time – payrolls, rent, interest, taxes, debts, cost of materials for goods and products, utilities and any other operating expenses – so that you know what you are dealing with and how you are going to address those expenses.
Not only does this give you a clear idea of where your expenses are, it can help to ensure that your cash flow position remains strong even when there are tight times. Giving yourself a strong cash flow position gives you flexibility and that is the name of the game.
Keep Your Personal and Business Finances Separate
There are far too many businesses where the owner cannot maintain a separation between their own finances and that of the business. This leads to a number of problems both personally and for the business itself.
By keeping them separate, you establish a clear boundary. This helps to keep you from taking out loans or credit cards for your business to solve personal financial issues or keeps you from investing personal funds into the business. Those sorts of things can lead to complications and can put you in a sticky situation that not only puts your personal finances in question, but your business finances as well.
Maintaining total separation is the only smart way to operate and keeps you from any potentially dangerous transactions or mix ups in the future.