We have redefined what it means to build a career and a meaningful professional life. Today, we are no longer confined by the notion of a traditional nine-to-five office job, nor do we attach that idea to “financial security”. With so many new businesses coming to life every day around the world, we have started to embrace the freedom that comes with running your own business, whether in the form of a freelance digital career, a startup, a franchise, or even a partnership.
However, this amazing and liberating experience comes with its own challenges. The first of many includes the financial planning that is necessary to start and run a company and grow it over time. For first-time business owners who are looking into all the different ways to fund their success, this can be a handy guide for deciding on your path forward. With so many decisions that go into the process of starting a company, you can start by taking the right steps to ensure financial viability in order to help your future business grow!
Select a financing method
Considering the fact that starting new businesses has become more popular than ever, it’s only natural to see more financing solutions popping up to meet the needs of new business owners. It’s a market with so much potential, and the diversity of these new companies requires equal diversity in financing. You no longer have to stick to bank loans only, on the contrary. You can look into a wide range of funding options that can help you provide a steady influx of cash for your brand. For starters, crowd-funding platforms are a helpful tool for particularly innovative products and solutions. Plus, they help you assess the level of interest your potential customers have in the product you intend to sell. Then again, there are alternative institutions you can go to for loans, as well as angel investors. Do some research, look into your options, and you can even combine your own personal savings with another financing solution.
Run a cost estimate
What can help you determine the best possible financing solution for your business? Understanding the market and the business model you choose. Each structure comes with different investment needs as well as ongoing cost projections. Of course, depending on the region where you plan to run your company and the market you wish to serve, you’ll come across different rough estimations to serve as general guidelines.
What you’ll notice is that different business models require different funds. If you take a look at a typical franchise cost breakdown compared to a startup, you may determine that it might be more financially viable to join an existing franchise than to fund a brand-new business. Add to that the perks of existing market research and customer data, and you can already see that franchising allows you to cut various costs from the start. Then again, perhaps certain ideas that are perfect for a startup can bring more financial merit down the line, making that sizeable initial investment perfectly justifiable.
Determine the types of costs
Having a general idea of the funds you need to start a company is only one piece of the puzzle. Add to that, you need to have a clear view of how much money it will take to keep your daily operations running, provide a stellar service or product, and hopefully grow your business over time. That said, you should consider various types of costs that your future company may require.
- One-time costs include paying for registering your business, obtaining necessary licenses, equipping your office, and similar starting steps.
- Recurring costs such as utility bills, bookkeeping, employee salaries, and other ongoing expenses can vary from month to month or season to season, which will affect your financial stability.
- Essential costs are the ones you cannot possibly run a business without, such as registering your company.
- Optional costs are typically investments you can make later in the process as your business matures and becomes more financially stable. However, it’s always wise to wait and not tap into your budget when you’re still in the early stages of earning your reputation.
Allocate your funds wisely
Do you really need a large office in the heart of the city for your small startup? Or a massive launch party that will set you back a decent sum of money? While the excitement of starting your business may be grand enough to inspire you to invest in certain “luxuries”, you should consider postponing or scaling down those expenses until your business becomes truly profitable. This will help you protect your reputation, but also safeguard your cash flow from too many fluctuations. Whenever it’s time to tap into your business bank account, make sure you can predict how your business will benefit from every investment you make. ROI is not a term to be taken lightly, especially for a young company up against many well-established competitors.
Calculating and managing your expenses is a vital step in starting and protecting your business. Use these tips to gain a better understanding of what it takes to finance a business venture and how you can structure your investment to ensure years of success in your industry.