Starting your own small business could be the first step to financial freedom. You’ll escape from the trappings of your existing job. You’ll become your own boss, pursue your passions, and make the big decisions! It’s a wonderful experience, and it could set you up for life. Unfortunately, it’s no walk-in-the-park. Starting a business is a difficult, stressful pursuit. The most pressing issue for every small business is money. Those financial bills and spreadsheets will often keep you awake at night in the early days. Until you begin making a reliable return on investment, you might struggle.
In this post, we’ll help you conquer that difficult first stage. Finances are the single biggest reason for would-be entrepreneurs giving up on their dream. With sensible budgeting, lots of planning, and intelligent investments, we’ll help you get off the ground. It all starts with strict planning. Diving head-first into the business without a strong direction is a big mistake. As a business, you need to carefully consider your budget. Then, you need a strict plan to lay out where the next bit of income will come from. Follow the advice here, and you could be a millionaire in no time!
Calculate your startup costs
The initial costs of a business are the most difficult to raise. Without a big capital investment, it’s tricky to find the early funds. The first step is understanding exactly what you need. Your startup costs are numbers you’ll have to muster to get the company off the ground and start making a little money. Typically, we divide those numbers into two categories:
- Business assets
The startup assets are all the physical things you need to start trading. For example, if you’re starting a plumbing business, you’ll need tools and a van. A farmer needs equipment and farm vehicles. A shopkeeper needs stock. List your assets as thoroughly as possible and be realistic. Then, obtain a variety of quotes from suppliers and sellers. If you’re the farmer in this scenario, look at http://plant.autotrader.co.uk/ for secondhand assets. Always look for the budget alternatives here and keep those initial costs down.
- Business expenses
The second category is business expenses. These are all the other costs associated with starting a business. It includes the likes of insurance, rental payments and wages. It’s the cost of building a website or listing your services in the local paper. Any marketing, PR, and advertising costs should be calculated and listed here. Again, try to keep this specific and look for the budget options. It’s easy to get carried away in this category. Keep it strictly to the necessary expenses.
Draw up a budget
Now you understand the startup costs, you can begin to draw up a full budget. You can calculate exactly how much cash you need to start. More importantly, you can figure out how to distribute it over the coming months, and where best to invest. Securing any level of funding is contingent on a strict budget. Without a deep breakdown of costs, you’ll struggle to convince any bank or lender that you are worth investing in. It’s often worth seeking the advice of a business or financial consultant here.
Allow an emergency pot
It’s a key piece of advice that many first-time business owners forget. An emergency fund is crucial in the early months. Surprise costs can jump out of nowhere while you’re finding your feet. There’s bound to be something you’ve failed to account for. You’ll learn on the job here, and you can’t predict anything. Keep an emergency fund to one side to deal with this. We’ve seen many small companies crippled in the early days by surprise costs.
Define your income plan
Before any bank or lender will grant you funds, they’ll want to see your income plan. A full business plan should tell the bank what your company hopes to achieve. But, most importantly, it should tell them how you expect to make money. You need to present a viable, realistic plan for recouping their investments. They need to know how soon you expect to repay them. Every business needs to make money, so figure it out early. A lot of modern companies plan to grow now and figure out how to monetise later. This is a dangerous game to play with your business finances! Define it early and set out a timeline for your income.
Forms of funding
There are a few different ways to inject money into your business. The first and obvious choice is putting up the money yourself. If you can’t invest in yourself, how can you expect others to? But, if that’s not an option, here are some other choices:
- Bank loan
Most small businesses turn to the bank to get their first venture off the ground. Most banks are willing to offer a small sum, providing you’ve got a strong business plan and reliable credit history. Seek the opinion of a financial advisor first and shape your pitch accordingly.
- Government grants
Many startups qualify for a government grant to get off the ground. In the music and arts sector, there is often funding available to cover those pesky startup costs. They’ll also give you advice and direction. It’s well worth approaching your local government and seeing what’s available to you.
- Friends and family
Some choose to approach their friends and family before asking the bank for a loan. You can strike a more informal arrangement and a payback system that gives you some breathing room. When there is a bank involved, it can be a little intimidating.
- Angel investors
Finally, you can look to angel investors for that cash injection. The only trouble here is that you’ll have to give away a share of your company. In most cases, we suggest that it’s probably too early to start looking for Angel investment. But, it doesn’t hurt to see what’s out there.
Funding your small startup business is no easy job. In fact, it’s the biggest cause of failure in the early days. Don’t let this put you off, however. Follow this advice and you’ll give yourself the best possible shot at creating a successful business.