Being an entrepreneur can be overwhelming, even for the best of us.
We’ve all been there – the constant need to work on creative innovation, transform your ideas into products, and find the right people to do the job.
Not to mention all the financial and legal aspects that may not make any sense in some cases.
If you’re starting a brand-new business, you will love our eight entrepreneurship recommendations. They will inspire you to keep working on your dream and help you get things done the right way.
Let’s jump right in:
1. Learn how to manage your cash flow
The most common reason why most start-ups fail is running out of capital.
To be successful in business requires a deep understanding of cash flow management. Every penny needs to be accounted for. As the CEO, you want to know exactly where the money is going and where it’s coming from.
If you’re unable to stay in control of your cash flow, you risk taking a massive budget hit.
This move will ultimately result in bankruptcy.
Most small businesses can’t afford to lose capital, no matter how great their product is or what the public is saying. If you run out of money, you’re out. Therefore, setting and maintaining a budget is crucial for your company’s success.
Based on our analysis, entrepreneurs who focus on having money in the bank gain more flexibility in their business strategy.
Cash can save a business by allowing the owner to pivot out of a crisis (remember the 2008 crash?). In addition to playing a crucial role in the strategy, cash can also be a decisive factor in getting a credit grant, making or breaking a company during trying times.
2. Start simple and learn as you go
Most entrepreneurs(especially tech start-ups) think that simplicity is overrated.
They all want to become the next Elon Musk or re-invent the wheel, but they forget the basics of economics: profit = total revenue – expenses.
Don’t get us wrong. We love seeing young entrepreneurs turning innovative ideas into reality. However, they overlook the important stuff, like paying themselves regularly or finding a cost reduction strategy.
Based on our experience, it’s not always the entrepreneur’s fault.
Too often, we hear people offering us “free tips” regarding specific metrics like profit per input, gross margin analysis or diminishing marginal utility.
All these things are crucial for your long-term success. However, suppose you’re just getting started. In that case, the basics (like being profitable) will help you better understand the world of entrepreneurship without being overwhelmed by the complicated economics glossary.
Do you have this issue with your business?
In that case, make sure you keep it simple and learn the complicated things as your company expands. This way, you will be able to generate accurate financial reporting for your start-up.
Once you’ve got the basics out of the way, you can focus on appearing on the cover of Forbes magazine!
3. Keep track of your spending
Running a real business is not as simple as the so-called “financial gurus” are claiming.
One of the most common mistakes beginner entrepreneurs is that they assume the financial aspect of their company is easy to handle.
Even if you’re the owner of a newly released start-up, the expenses will pile up, and unless you know what you’re doing, it will get messy pretty quickly. That’s why we suggest using accounting software like Intuit’s Quickbooks to keep things organized.
Alternatively, you can hire a specialist to deal with the books, but it may not be a great investment early on for most companies.
By tracking your spending, you can successfully manage your cash flow management and remain well-organized for tax season. By having everything on point from day 1, you will be able to handle the situation better as the company starts scaling,
Avoid taking unnecessary risks that may result in having problems with the law for mishandling your taxes. Keep a detailed record of every transaction made and break your data into categories to make it more visual and less frustrating to deal with.
4. Don’t rush the scaling process
We all get excited when thinking of the future of our business.
We dream of making it to Fortune 500 or renting a tall office building in Silicon Valley. While these long-term goals are essential, you must start lean.
Even though it might be tempting to hire more specialists when things get complicated, it’s better to save money by sticking to a smaller team. The lesson here is simple – focus on increasing your revenue and delivering high-quality work with fewer resources.
Scaling your business too early can damage your finances since employees are expensive, and having more is not always the solution to your problem.
Instead, try forming a small team of multi-skilled experts and teach them everything they need to know for your company to grow fast, without compromising on quality.
5. Stay optimistic but have an alternative strategy
Having an optimistic mindset will help you strive in the business world.
However, starting a company is a risky decision no matter how great your budget or idea. Thus, you need to prepare for what’s worse.
Quitting your job might seem tempting, since it allows you to work more on your dream. However, studies on Fortune 500 companies have shown that most entrepreneurs didn’t quit their job immediately after they started their company.
Think about it.
If you decide to quit your job and start a business, you will essentially cut your main income source. Your idea can be great, but the results will not come right away. We suggest that you keep your job until you’re absolutely sure that your business will generate more revenue.
Alternatively, you can find a different income source.
For example, some entrepreneurs play professional poker while others prefer investing in stocks or cryptocurrency.
Even though both gambling and trading are tempting alternatives to working a regular job, they are extremely risky. Before you embark in either of them, we recommend reading an in-depth comparative analysis between casinos and trading platforms.
This way, you will be able to make a more informed decision and know the exact benefits and disadvantages they will bring you.
SPOILER ALERT: They’re both great if you know what you’re doing, but trading has better long-term potential, while gambling can bring you better returns (especially if you play poker
Everything you do in business comes with a risk attached. Your goal is to find an activity that can help you minimize the risk as much as possible and find a way to save money while also generating a decent revenue.
We didn’t say it’s going to be easy!
6. Focus on customer acquisition
Customer acquisition is the main objective of any successful company.
Without any customers, you have no business. The process of acquiring clients differs from one industry to another. Still, one thing is for sure – the sooner you discover how to bring in more customers, the higher your chances of being profitable.
Once you’ve identified a customer acquisition strategy that works, your goal is to optimize and scale this process. Obviously, you won’t always be able to test all the possible traffic channels in the beginning.
Since grabbing customer’s attention costs both money and time, you are better off focusing on the most profitable traffic channels. Once you’ve entirely optimized for these channels, you will have enough capital to explore additional traffic sources for your business.
7. Pay your taxes on time and learn the regulations
If you’ve never been self-employed before, you may be tempted to overlook taxes.
Successfully operating a business of any size requires a thorough understanding of the complex world of taxes.
People in business often compare the tax system with a swamp. Those that are unprepared will drown and never come back. To avoid falling into the trap of taxes, it’s essential to do your homework.
Research your city, county, and state tax code to know exactly how much you need to give away to the government. Once you have a strong understanding of the system, you should create a plan in advance that will include taxes in your budgeting strategies.
From choosing what type of corporation you want(LLC or S-Corp) to the period you’re hiring new talents and when you purchase technology, everything can drastically influence the taxes you pay.
To avoid any financial surprises, we highly recommend consulting a CPA to elaborate a proper tax plan.
8. Set clear financial goals
We often hear entrepreneurs say: “My goal is to have a multi-million-dollar corporation.”
But how can you measure “Multi-millions”?
Our suggestion is to break down your final financial objective into smaller goals that are reachable and measurable. These can be daily, weekly or even monthly income goals that you can monitor using financial software.
Once you’ve tracked your goals, you can easily make the necessary modifications that will help you optimize for growth. Alternatively, you can add milestones to your project to add smaller goals you can hit with ease.
Oftentimes, achieving small goals will offer you the confidence necessary to maintain your entrepreneurial spirit, which will ultimately result in achieving your primary goals (i.e. “Multi-million dollar company”)
Now it’s your turn
We hope you enjoyed our eight finance tips for new entrepreneurs.
Now it’s time to use the information provided to improve your business and achieve your financial goals this year.
Remember: starting a business is always risky, so it’s best to keep things simple and prepare for the worst.
Keeping track of your finances and focusing on customer acquisition will bring you a revenue boost, but you need to optimize your business for the long run.
Disclaimer: This article is purely informative and should not be considered financial advice. Please consult a financial specialist to determine the best strategy for your business before using any of the information mentioned in our blog post.