When thinking about starting any type of business, one of the first concerns that’ll undoubtedly rear its head is finance!
You’ll want to consider how you’ll fund your business, how long it might take until you can pay yourself and ultimately, how you expect to make a profit.
Government statistics show that there are 5.47 million small businesses in the UK employing up to 49 members of staff. If you’re planning on hiring staff, you’ll also need to think about your ability to pay them.
But, as well as business finance, you should also take into account your personal financial situation. While this may seem surprising, there are a few reasons why this is seen as a crucial element to starting a company. Let’s take a look at them.
Money management skills
If you’re well-equipped to deal with personal finances, you’ll easily be able to utilise those skills in your business. For example, building up strong credit history through managing aspects such as rent, direct debits, mortgages and bills will stand you in good stead to successfully operate a business.
Budgeting
If you’ve created and managed a budget in your personal life there’s no reason why you can’t do the same in business. Budgeting is all about knowing your income and outgoings, devising a plan and sticking to it. You’ll also be able to prioritise costs and reduce spending when and where needed.
Similarly to personal situations, you’ll probably need to create a longer-term budget and forecast when considering how you’ll run your business. This can help achieve goals and capitalise on any business investments.
Learn from mistakes
No doubt you’ll have made some previous mistakes when managing your personal finances. Whether that’s getting into unmanageable debt, over-spending on the wrong things or failing to save. But the good news is, you can take what you’ve learnt and apply it to your business model to ensure you don’t end up in the same situation with your company.
Use common sense!
This might seem simple but applying common sense to your business finance strategy will help you reap the rewards. Don’t spend on items that won’t help your company or drive growth but invest in those that will. This might mean paying a bit more for a quality product, material or service that you know will benefit your business in the long run.
Above all, start off small and simple and, while it’s healthy to have business aspirations, it’s important to focus on getting the basics right first, especially when it comes to finances.
