If you are about to start your own business, here are some dos and don’ts to keep in mind.
Starting out a business could be overwhelming, especially for the first-timers, as it requires a good deal of effort, time and strategy. The biggest challenge to start a business is to ensure the flow of investment. With the question of “What are the top three things I must and must not do?”, it comes as no surprise that money management is the most critical aspect.
In this article, we take a look at a few key money management heads-ups to make note of.
Bootstrap Or Borrow?
Bootstrapping is when one tries to build a business from his/her own personal finance or the operating revenue of the new company. Although it brings along the question of scalability after a certain point, it relieves you of the burden of Loans and repayments. Bootstrapping is easy while building the foundation of a business as it helps you have control over it without having to share ownership among investors and depending on other sources of funding.
Building A Cash Reserve
This is something that has stood the test of time. Though it applies to everyone, it is of prime importance for someone just starting off. This works as a contingency fund for paying off salaries if the cash flow dries up temporarily. Ideally, five percent of the pay cheque must be set aside towards this fund.
Eagle’s Eye On Profit
At an initial stage, entrepreneurs often wonder why they can’t see the money in the bank. With outstanding sales and healthy profits, not seeing the money in the bank can be disconcerting. Well, if the money is in the market it’s working to make more money. Had you kept your money in the bank, you would surely be able to see it there, but it wouldn’t grow aggressively. It would only make the company stagnant.
Apart from taking these money management measures, it’s important that you stay careful of some common money mistakes.
Spending Without Awareness
While the temptation of indulging in ‘Branding’ activities can be strong when you are testing the waters of entrepreneurship, it is advisable to venture into avenues of investment rather than expenditure. Remember that every penny spent is accountable for positive returns.
Unnecessary Skimping
While you might be on a shoestring budget and reaching out for every opportunity to save money, investing in productivity tools and services that simplify your day- to day operations is a sound business decision. Essentially, such expenditures have their returns in terms of time optimisation. So, do not shy away from your priority expenditures.
Not Getting Professional Help
To build a business right, it’s important to have the right kind of people by your side. Hiring a professional to get your finances in order must be among your top priority expenses.
The underlying philosophy is to remain adaptable. You should be able to adapt strategies according to your current needs in order to overcome potential difficulties.
BankBazaar is a leading online marketplace in India that helps consumers compare and apply for Credit Card, Personal Loan, Home Loan, Car Loan and insurance.