Money & Life contributors draw on their diverse range of experience to present you with insights and guidance that will help you manage your financial wellbeing, achieve your lifestyle goals and plan for your financial future.
Whether you’ve been plotting it for years or just recently decided to go for it, starting your own business is a big leap.
Now that you’re taking the first steps, pause for a moment to consider some often-overlooked factors that will set you up for success. While these may not be as exciting as dreaming up your vision or designing your marketing, building these tasks into your planning will give you the best chance to hit the ground running.
Build a solid platform
Pay off any debts first and have sufficient savings to see you through any start-up hitches. You might want to try saving half your household income for a year — this will not only give you a buffer, but a taste of how your first year in business might look.
Either way, make sure you’re using separate business bank accounts from day one. While you’re thinking about your bank balances, check those profit forecasts and make sure you’ve budgeted for retirement savings, which are even more important when you’re going out on your own. Risk averse planning now will allow you to be more adventurous once you’re operating.
Hustle on the side
Getting ready to start your own business doesn’t have to mean waiting around. Start now by making your new business a ‘side hustle’ while earning income from your normal job. Launching a writing business? Chase writing contracts in the industry you’re targeting. Opening a restaurant? Start menu testing. Developing an app? Make a minimum viable product. Consider going part time in your current job if you need more hours to build this vital experience and credibility. If you can get paid for your side hustle, you might even be able to create a financial ‘runway’ whereby you can predict how much of your current income you can replace with your new business over time.
Don’t wing it
What if you were unable to trade due to illness, or damage to your equipment or place of work? Plan for the unexpected and insure your business. If you’re not sure where to start, this summary of compulsory insurances and comparison list of insurance options by industry can be a good place to start.
Now is also the time to write a contingency plan. You’ll need to think through the worst possible scenarios and plan for how you would return to daily operations and over what time frame. You might also set a cap on how much time and money you’re willing to invest in your first year of operations, just in case your business isn’t as successful as you hoped.
Chase cash flow
Running out of cash is one of the main reasons small businesses fail. Get accounting software that shows and forecasts cash flow, and don’t wait to invoice — payment within a week is normal and expected in 2018.
Aim to build up a cash reserve so you can jump on opportunities such as purchasing inventory or advertising.
Start with an advantage
Unless accounting, finance and law are your specialities, you’ll probably save time and frustration by hiring experts to help you get underway. A good accountant and lawyer will help you to minimise liability; while a financial planner will help you plan for success, for example by suggesting a business structure or helping to separate business and personal finances. To find a CERTIFIED FINANCIAL PLANNER® professional in your area, click here.
Setting up in business is a challenge, but you wouldn’t be doing it if you didn’t believe in what sets you apart. There’s no reason to do it alone though. Seek out smart help when you’re starting out, and use the time you’ll save to hone in on the expertise that will make your business a success.