Congratulations! You’ve taken the plunge, and opened up a new business. This is an exciting time, and you’ll want to make sure that every aspect of your business is off to a strong start. You want to immediately offer flawless customer service, products or services, and ensure that you’re prepared to run your operation. In addition to these efforts, you’ll also need to responsibly manage your business’s finances.
One of the main reasons that starting a business can be daunting is due to the survival rates; only 51% of new businesses make it past the five-year mark. While this percentage has increased, and is currently at its highest rate since 1994, it is still difficult for newly opened businesses to flourish. This is why it’s important to establish these seven financial habits when first opening your business.
1. Follow a Budget
Before opening your business, write a budget that you can stick to each month. By creating and following a budget, you’ll be able to keep your business on a clear financial schedule. This will enable you to make smart financial decisions, and prevent you from overspending or making unnecessary purchases.
2. Save From the Start
From the beginning, make an effort to save funds for the future. You never know when your business could fall on hard times, and might need the extra cash to survive. Aim to save a certain amount of money each month that you can put toward last-minute repairs or other emergency costs. If your business goes through a rough time, it will be a relief to know that you have funds to keep your business up and running.
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3. Don’t Overdo It
While it may be tempting to stock up on inventory, hire extra employees or purchase additional items that you think might be helpful for your business, don’t go overboard. It’s important to be prudent when starting your business, and overspending may put you in a bind. You don’t want to expend money when first opening your business, and end up not being able to continue on because you’ve run out of funds!
4. Monitor Sales Trends
Consistently review your business’s sales, ensure you’re following your pre-determined budget and determine if there are any changes that need to be made. By keeping a record of how much money your business makes each month, you’ll be able to set goals for your employees so that you can continue to grow. Plus, if your sales drop, you’ll be in-the-know, and can start brainstorming ways to improve your operations.
5. Cut Unnecessary Costs
As you monitor your sales and spending amounts, you’ll want to periodically eliminate any areas that aren’t benefiting your business. If you try a marketing initiative, and it isn’t bringing in leads, you’ll want to put that money towards something else. Did you purchase a particular piece of inventory that isn’t selling? Start using those funds for inventory that customers are responding to. Regardless of what these costs may be, it is important to be realistic, and put your money to good use.
6. Use Coupons When You Can
While it might take some research, hunting down coupons can save your business major funds. Sites like Ebates.com can make this easier, so that you aren’t wasting too much time looking for worthwhile deals. Remember, every money-saving effort counts!
7. Consider Applying for Working Capital
Once your business has been up and running for a few months, you may want to consider applying for working capital. Having additional cash on hand might be beneficial for making big purchases or changes to your business, that you may not be able to afford currently. Make an effort to build strong business credit by establishing tradelines in your business’s name and always paying your debts on time—or, ideally, early. Having good business credit comes in handy in many circumstances, including when you need to obtain more financing, and it can help you qualify for better terms.
Make your business a success by putting your finances first. Don’t fall into bad habits that may jeopardize the future of your small business. If your business experiences financial troubles, it can be difficult to overcome them, so it helps to be proactive and master good financial behaviors as soon as you start your business. Although these strategies require additional time and energy, you’ll thank yourself when your business is a booming success.
Let us know in the comment section below if you have any other financial management tips for small business owners.
Katie Alteri is the Content Marketing Coordinator at Fora Financial, a provider of working capital solutions to small businesses nationwide.