By Michelle Glassburn
Let’s start with the doom-and-gloom: Many start-ups fail even if they offer a great product and have a great owner. They fail because the owners didn’t do their financial homework.
Here are a few tips to help you get off to a sunny start.
Save first. Plan to have 6-9 months of family expenses in savings. Lower your living expenses so you can save more. Use a budget and cut the discretionary spending as you prepare to launch your business. Check out this printable family budget – budgetworksheets.org – it’s a basic tool that is easy to use and highly customizable.
Keep your business finances and personal finances separate. This includes getting separate insurance for the business. Keep track of all out-of-pocket expenses. And, if you aren’t taking a salary, be sure to track your hours so you can be repaid later. If you are leaving a job to work for the business, make sure you have a plan for health as well as disability insurance.
Predicting your cash flow will be key to your success. Many businesses with customers just run out of cash and have to close. Understanding what to charge for your products, predicting how and when your customers will pay, and lining up your investors beforehand will help keep you going. Keeping the fixed expenses low for your business will also help. Fixed expenses are those items – like rent – that remain the same every month regardless of how much (or how little) you sell. In lean times, these items can quickly eat up your cash and put your business at risk.
Surround yourself with supportive, knowledgeable, and honest advisors. Don’t skimp on getting help from a tax or accounting expert when you set up your books, your funding sources and the business itself. Learn all you can from great resources online, too. Check out www.sba.gov in the Starting & Managing a Business section for lots of great tools and advice. In Howard County, the Economic Development Authority is a great local resource for new businesses. Check out all their resources – from business planning tools to information on funding sources – at hceda.org.
Michelle Glassburn is former president of makingCHANGE, a Howard County-based nonprofit that offers financial education that empowers people to control their money … and change their lives. For information, visit makingchangecenter.org. Michelle welcomes questions from readers – about savvy spending, saving and investing.
