Starting a business is a really exciting time. You’re finally taking the step to be your own boss and fulfill what is probably a long-held dream. But you have to prepare ahead of time. You can have the best business idea in the world, but you have to be financially ready to get your business off the ground. Launching a new business requires you to think of your finances in two separate ways: business and personal.
On the personal level, you have to know how you’re planning to pay your regular monthly expenses, such as the rent or mortgage, groceries, and utilities, while you’re getting your business going. This will be less of a concern for someone who has a spouse with a steady job who can cover all the living expenses for a time. But if you are currently working in a full-time job and rely on your paycheck to cover your bills, don’t despair. You can save money ahead of launching your business in order to ensure your family’s security. The more money you save, the more time you allow yourself to get your business up and running.
On the other hand, starting a business usually requires some level of funds in order to be successful, and you have to consider how much it will cost to run your business. Will you have overhead such as rent and utilities and even payroll, or are you working by yourself out of your home and therefore have very low expenses? How about expenses that will help to get your business up and running – things like building a website, printing business cards, insurance, and advertising? Will you begin making money right away? How long do you expect it to take before you can at least cover your business expenses? You should have a sense of timeline to reach certain financial goals so that you have something against which to measure your progress going forward.
If these questions are overwhelming to you and you suddenly feel like you’re completely financially unprepared to start a business, you have options. You can keep your day job (if you already have one) while you’re getting your new business started, or you can start your business but take on a second job to pay the bills. The more savings you have in the bank before you start, the more flexibility you have in beginning this new venture, so it may just be a matter of tightening your belt for a while to allow yourself to save the money you’ll need.
And to that point - think about where the money will come from to start up that business. Typically you have two choices: savings or borrowing. Using your personal savings will be the cheapest option. Borrowing – whether that’s from family or friends, credit cards, a business loan, or a home equity loan – comes with costs. Even when it’s from a family member and may not carry any interest, there are risks in terms of the possibility of damaging your personal relationship with the person if you can’t pay them back as you initially agreed.
As with so many things in life, preparation and thought put into the financial side of things can make starting a business so much easier. If you have a plan and know how you’re going to fund it for a certain length of time, you’ll be way ahead of the game and ready to make a splash as a new business owner.