The number one issue business owners face is limited access to capital. When starting a business, money problems can definitely shut things down. To help you manage your money and reduce the risks associated with starting a business, we asked financial planners and entrepreneurs to share their tips and success strategies with you. Here’s what the experts had to say…
What financial measures can entrepreneurs take to reduce their startup risks?
1. “Have at least one year’s worth of expenses in the bank before you start your business-period. This cash in the bank acts as a shock absorber when things don’t go according to plan. Golden rule number 2-make sure your spouse/partner knows exactly where you are financially each month during your 1st year in business. You can accomplish this by holding 30 minute financial review meetings. Your spouse/partner need not be an accountant or even understand numbers that well. More importantly, it’s a way of holding yourself accountable. Without this check and balance system, many new entrepreneurs go into denial mode, hide the bad news as long as possible and inevitably this ends in disaster.” -Mark Zaifman, Spiritus Financial Planning, Inc.
2. Learn how to read your financial statements. “One of the biggest mistakes that business owners make is spending money chasing customers and sales instead of learning how to read their financials and make their business cash flow positive. The number one thing they need to do is know what their cash flow is at all times and the second is to calculate their breakeven. It is critical to know what day of the month they breakeven, stop paying everyone else and start paying themselves.” -Rhondalynn Korokak, Imagineering Unlimited
3. “Nothing is more important than revenue. If you have to make a choice on where to spend money always default to activities that directly relate to an increase in sales. If no one is coming through the front door it does not matter that you repainted the walls. Also, do not spend money until the money is in the bank. No matter how “guaranteed” a deal is, never assume it is closed until the contract is signed and the money has been paid. A lot of things can go wrong between a “yes” until the bill is paid. Although it can be hard, avoid spending the money on upgrades until you are sure that you have received payment.” -Jeff Bogensberger, SOCO Games
4. “The number one reason for failure is undercapitalization.