While starting a business will be an exciting and challenging chapter in your life, it will also be an expensive one. Before rushing into it and getting started right away, it is important that you take some time to plan your startup and ensure that you have enough money to keep yourself and your business afloat during the first few months.
Interested to hear more? We have put together some tips on how to get started with planning your business finances.
Explore Funding Options from Your Own Personal Finances
When it comes to raising the money you need to get started, the first place you should look is your own finances to determine whether you have any money to invest. You should also think about the capital you could raise through other means. For example, if you are currently in possession of a life insurance policy, you could sell it through a life settlement to obtain an immediate cash payout, which you could then invest into your business to cover the startup costs.
If you would like more information about selling your policy, we recommend reviewing a guide online to find out more.
Put Together a Business Plan
The next thing you need to do is create a business plan, as this will be essential in getting funding. There are many different templates available online that you can use, along with advice and tips on how to do it effectively. If you are inexperienced in this area, it may also be worth seeking out professional advice from a consultant that is qualified in creating business plans.
Create a Financial Forecast
For those who are unfamiliar with the term, a financial forecast is essentially a breakdown of the money that will be incoming and outgoing over a set period of time. In order to estimate how much money you will need to get started, it is crucial that you create a forecast, taking into account any startup expenses you will need and any ongoing expenses that will kick in once you have begun.
You should aim to cover your expenses for at least the first few months, as you may not bring in as many sales as you would like during this initial period. Therefore, combining the two numbers you have put together in the forecast will give you a rough idea of how much money you will need to keep operations running smoothly.
Ensure You Prepare for the Worst
Finally, and perhaps most importantly, you need to ensure that you are preparing for the worst-case scenario. Whilst it may be preferential to assume that your business will run smoothly during this time, it is not realistic, and ignoring the potential of risk and hazards will result in a lack of planning that could, potentially, get you in hot water.
Make sure you have a stash of cash to fall back on, or a safe exit plan in the event of your business failing. You do not want to rub salt in the wound by being left with a huge amount of debt should you not get through those initial few months.