What a lot of entrepreneurs think of when they think of finances is what they
want to make in order to be successful. But in order to even get to that
level, you need to consider setting yourself up in the best position.
Think about what you absolutely need for your new business—stressing the
‘need’ in that phrase. While it might be nice to have the fanciest computer
equipment, is it vital to the success of your business? If so, then go ahead
and purchase it. If it can wait, then it’s probably best to do so.
Do you need a cellular phone for your business or do you just need a reason
to get one for your personal use? If it’s not necessary for business, then you
don’t buy it.
Make yourself a plan for the possibility of getting into debt. You may have a
time when the money just isn’t flowing in, but the bills still are. What are
you going to do? Since your business has already begun on borrowed
money, you don’t want to sink yourself any further in debt.
You can always ask for more capital from the bank, but this is only in the
worst case scenario. You really want to make sure that you have planned for
growth without over budgeting. Think of this as a student loan, you will need
to pay the loan off. It’s better to try to get ahead with as little borrowed
money as possible. The interest alone will keep you busy for long enough.
And monitoring your cash flow is usually the best way to keep your financial
statements healthy. You need to keep track of every cent that goes in and
out of your business.
Maybe it’s not growing as quickly as you thought it would. You may want to
adjust your business plan for the moment and spend less money targeting
customers. Work on a smaller consumer base; nurture that before you start
getting capital for a customer population that doesn’t exist.
Be stingy when you first start with things that you don’t really need. Keep
using the home phone and your old computer (as long as they both work
well) until you can afford a new one. There is no sense buying new items for
a business that fails because of a lack of cost control.
SORTING OUT THE DETAILS
Before you dive into your own home business, you will want to set up a
system that creates order for the details.
You can’t afford to make little mistakes, so it’s time to sweat the details.
Here’s why you can’t afford not to organize:
• You may forget a customer’s name
• You may confuse shipping addresses
• You may confuse billing addresses
• You may send the wrong item
• Your advertising may not have the correct information and thus,
customers can’t reach you
• You may miss details on important contracts
• You may miss deadlines or fines
• You may not add up your bills or taxes correctly
That spells disaster for a big business and murder for a small one.
It’s time to get you ready to tackle all of the little things that DO matter.
Starting with the financial details, you’ll want to enlist the help of a tax
advisor or a financial professional. This might sound like a large expense,
but having the numbers right is the difference between success and failure.
And in either case, you may just need to watch someone else at work until
you can handle it on your own.
As for your software to manage customer information, you will need
something that you can handle or can be automatic. If your customers are
ordering items online, the forms can automatically create a list for you. Or
you may want to create a spreadsheet for customer information (though this
is much more time consuming).
And just because you have methods in place doesn’t mean that you don’t
have to double check them every now and then. A simple form that asks for
address changes is always a good way to update your lists.
If you find that your products are not being shipped correctly, then you want
to double check the packing yourself or create a backup plan to ship the
correct item out properly. If it’s a problem with the distributor, then you’ll
want to find out where the confusion is and if the problem does not resolve,
find someone else.
Legally speaking, the devil is certainly in the details. You’ll want to enlist the
help of a lawyer for these kinds of issues. The fees are well worth the peace
of mind that you are confident in whatever paper you have to sign.
Details matter and you will need to think of everything that could possibly go
wrong, but by setting up a few systems to double check yourself, you’re sure
to sort everything out correctly and to the satisfaction of your customers.
ESTIMATING YOUR START UP COSTS
As you learned in the business plan, you want to determine how money you
need to get started with your business. And how do you do that?
Start by determining all of the expenses that you are going to need to handle
over the first several months. This might include rent, equipment, and
supplies. Think realistically about what you might need ONLY for business
purposes. Since you will most likely be taking out a loan, you will want to
take out the bare minimum necessary.
On the other hand, you will need to ask for as much as you actually need.
Too little and you’re not ready for growth, too much and you’re paying
interest off until you retire.
Sit down with a piece of paper to determine what you will need to begin your
business venture. These may be one time costs and those that will occur on
a monthly basis (fixed expenses). You will also want to think about variable
expenses, which may include utilities and shipping costs as these will change
on a monthly basis. You’ll need to estimate how much you anticipate
spending and factor that into your loan.
The trick with estimating start up costs is that there really isn’t a formula
that works for every business. Some home businesses don’t need much to
get by, while others will need a massive amount of money.
Look at your business plan to see what kind of growth you are reasonably
expecting and derive a number from there. To that, you may want to add a
few additional dollars in order to compensate for any emergencies.
Here is a list of things that you can factor into your start up costs:
• Initial expenses—office supplies, equipment, initial advertising runs,
and domain name registration
• What you already have on hand in the bank to be used for your
• Monthly costs-rent, insurance, taxes, monthly bills, equipment rental,
• Current assets-signs, fixtures (if applicable)
• Varying monthly expenses-utilities, shipping costs, office supplies
Being as detailed as possible will not only allow you to have the proper
amount of money for a successful venture, but it will also show the bank that
you have researched your business and are well-informed as to the risk.
These two things alone may help you get the money that you need as well as
make it easier for you to ask for more if the need should arise.