You’ve just started a new company! Congratulations. This challenging but exciting time is probably something you’ve been preparing for mentally and financially for quite some time. While it’s no secret that starting a new business can be challenging, putting yourself in a solid financial position is the best way to guarantee long-term success. Therefore, take some time to learn how to secure stable financial health from the moment you open your company.
1. Evaluate Your Current Financial Situation
Before you do your projections and calculations, think about the money you have right now and where it will go. Forecasting future financial success is essential, but you must know what you’re working with. Do you have enough money to cover your current expenses? If not, where are you going to get it from?
2. Don’t Be Afraid to Ask for Help
Consider loans, investors, and a business line of credit to get started. Few organizations begin entirely alone, and with the extra support at the beginning, you’ll be much more financially stable moving forward. It’s not always easy to ask for help, but don’t let pride stop you from taking advantage of your resources. Be aware that if you take the path of working with investors, they may want input into the workings of your company. When you negotiate the terms of the investment, make it clear how much input the investor will have in business decisions so that you are on the page from the second you both sign the contract.
3. Develop a Financial Plan
Once you’ve evaluated your current situation, develop a financial plan. Base it around your financial goals, and include your budget and cash flow plan. Like anything in life, planning a budget helps you realistically manage your finances, accounting for things you’ll need money for along the way. Be realistic when you set it up and include an emergency fund for any extra expenses.
4. Plan Your Cash Flow
Even non-business owners deal with cash flow issues. You might have a considerable sum of money from a client that you’re waiting to be deposited into your account, but while you wait, you need cash. Therefore, have a plan for handling this, and have an emergency stash on hand.
5. Hire a Financial Advisor and Consult With Business Owners
Consider hiring a financial advisor. It’s their job to ensure you’re in a position to succeed, and they can educate you on everything you’ll need to know for this endeavor. There may be financial implications of starting a business that you haven’t realized yet, which is more representative of the nature of the industry than your financial planning.
In fact, according to Small Business Report Accounting, 60% of small business owners aren’t very knowledgeable about the finance and accounting aspects of their businesses. Unless your company deals explicitly with finance, you are probably not a financial expert. Consult with other small business owners and a financial professional for help with accounting and finance.
6. Stay Current With Your Financial Information
Stay up-to-date with your financial information. According to the Federal Deposit Insurance Corporation, all FDIC-insured institutions must disclose extensive financial information in quarterly reports known as Call Reports. However, the obligation to disclose that information shouldn’t be the only reason you’re current with your information. Be proactive, check your records daily or weekly, and never let a loss or debt come as a surprise.
7. Be Strategic With Technology Investments
Be strategic with investments in technology and practices. The industry moves fast. According to Ernst & Young Global Limited, if you invest in technologies that will be obsolete in five years or less, you’ll quickly lose money. Incorporate modern technology into your business practices and research all the equipment and software you need to stay on top of your industry’s natural progression.
As a new business owner, you don’t need a reminder of how stressful the process can be. Prioritize secure and stable financial health, and you’ll be better positioned to succeed.