Many small businesses take some time to start turning a profit, and many do not make it past the first couple of years. As an entrepreneur, there are smart financial moves you can make that will reduce some of the obstacles to success.
Organize Your Personal Finances
While your personal and business finances should be separate, getting your personal finances in order is smart. Some lenders or investors may look at your personal credit record before giving you a loan or investing in your company. Having your own financial life organized also means that you know how much money you need to survive each month and what kind of a salary you need to be able to draw. This organization should involve making a budget and working to pay off your debt. If you have student loans, you might be able to reduce your monthly expenses by refinancing them. This can give you a lower interest rate and can shorten repayment with how long it takes to pay off the balance.
Separate from the Business
You need to separate your personal and business finances. This means a separate bank account and credit card for the company. Not only will this make things easier for tax purposes, but it will be much easier for you to track and record your expenses. Depending on the business you are in and the protections available, mingling your finances might also increase your potential liability in some cases. You should be sure that you carry the appropriate insurance to protect against liability.
Keep Your Day Job
Depending on both the nature of your business and your regular employment, you may want to keep your day job while you build up the business. The best reason to do this is so that you don’t have to worry about money in those early days, but there are a few caveats. First, some types of businesses will require you to be available during regular Monday to Friday office hours, so if you already have an office job, there could be a scheduling conflict.
Second, some jobs prohibit some form of moonlighting or claim ownership of any intellectual property that you create while you are employed by them. Be sure to check out your company’s policies and your employment contract carefully before you try to juggle a full-time job and a side business. If you can’t balance both, you may want to look for a part-time job or try to pick up some gig or contract work so that you still have a little money coming in.
No matter how successful your business is, it will be more prone to fail if your accounts are not managed correctly. As an entrepreneur, you’ll be understandably eager to avoid spending any money that you don’t have to, but it is worthwhile to work with an accountant and a bookkeeper to make sure your financial affairs are in order. You may also want to hire an attorney to help you determine what type of business entity would be most appropriate and advantageous and to prepare the appropriate paperwork. This will affect how you file your taxes among other things.