Congratulations on your new venture! Starting your own business can be one of the most rewarding things you’ll do in life, but also one of the most challenging. Here are a few key considerations to help you grow a successful business.
CASH FLOW IS KING
- Understand your business cash flow so you can plan for fluctuations in income and budget for both regularly occurring monthly expenses and annual expenses
- Remember tax-deductible expenses are still expenses, and gross business revenue is very different than net revenue or take home pay.
- Understand your personal cash flow so you know how much you need to take home each month. A sustainable business model must pay a living wage.
Nutshell- know the revenue your business needs, and the take-home income you need.
BUFFERS ARE IMPORTANT
- Your business revenues will likely fluctuate a lot, especially early on. Aim to keep a business savings buffer that can cover months where revenue is low
- Self-employment may mean less take-home pay, so prioritize building your personal savings buffer as well, ideally at least 3-6 months' worth of expenses.
Nutshell- running a business involves risk, hedge risks by having cash available.
DON’T FORGET TO REPLACE BENEFITS
- Your former employer may have offered benefits such as a retirement plan, life insurance, disability insurance, and health insurance. Now you are responsible for setting those up on your own! Even if your former employer didn’t provide benefits, now is a great time to evaluate.
- Consider the options for how you set up your benefits; employer benefits v. personal plans have different tax implications and match different needs.
Nutshell- understand the retirement savings and insurance options and get yourself covered
CONSULT WITH PROFESSIONALS AS NEEDED
- An accountant can help you set up your books, understand your cash flow, and how to proactively plan for taxes to help you minimize the amount you owe
- An insurance agent can help you understand benefit options and costs for life, disability, and health insurance. They can also help you evaluate employer plans v. personal plans.
- A financial advisor can help you manage your personal budget (some may help with business budgets as well) and explore different retirement savings options. Some offer insurance as well.
- A business coach can help you set revenue goals and identify activities and investments necessary to help achieve those goals.
- A business attorney can help you understand the legal risks involved in self-employment and help you protect yourself with the proper legal contracts and documentation.
Nutshell- you don’t know what you don’t know until you consult with someone who knows. Seek professional guidance early on to avoid costly mistakes.
YOU DON'T HAVE TO DO IT ALL AT ONCE
- You may be feeling overwhelmed, not to worry! This post is intended to give you a big picture overview of things that will take you months, if not years, to put in place.
- Start by prioritizing what things need to happen first, assigning timelines to deal with tasks in a manageable way.
- The important thing is to not let any of these things fall through the cracks, so be sure to set reminders in your calendar. You could even consider setting appointments with some of the listed professionals for a date in the future, as a way of making sure it happens even if not right now.
Again, congratulations on embarking on this adventure, I wish you the best of luck!