Being an entrepreneur and a small business owner is all about following your dreams, being independent, and calling your own shots. But being a small business owner is also about being responsible, which means keeping a tight grip on your company’s financial situation.
If you’re like most people, that whole financial responsibility thing isn’t something that comes naturally – it has to be learned. Got a great idea? That’s fantastic. Now, how are you going to pay to do it, and then keep the lights on long-term?
Being a small business owner might not be as complicated as running a major enterprise but there are still several financial best practices you should be aware of, and tips that will help your company thrive.
1. Make A Budget & Stick To It
If you want your household to be financially stable, it needs a budget, and it’s no different for your business. The only variable is how often you review it, which will depend on how quickly your business grows, if it gains any investors, or if it suffers losses.
Creating your company budget will prevent you from sinking your organization into irrecoverable debt, will give you a solid idea of how things are going month-to-month, and will also help you resist purchases you can’t really afford because they seem like a good idea in the moment.
2. Get Organized Early
When you’re first getting started as a small business owner, make sure you keep track of everything, even when most of your numbers are zero. You’ll be thankful when your business starts really chugging along – and eating up your time – that you already have financial organizational tools and protocols in place.
3. Use Free Tools When You Can
There are very few business operations you need to do that can’t be helped by software, and a lot of great options are free or very inexpensive. Whether you’re struggling with invoicing, customer service or fulfillment, there’s probably a tool that can help without making much of a dent in your budget.
4. Start Contributing To An Emergency Fund
Your business will most certainly experience a slow period, setback or problem at some point – start contributing to an emergency fund early and often to make sure you can weather the storm.
5. Reinvest In The Company
That said, your business will very likely experience times of rapid growth and incredible profit, which is great! During this time, resist the urge to reward yourself too much (a reasonable bonus is fine), and instead reinvest the extra capital into the company.
This may mean hiring more people to keep the momentum going, updating your software, developing new marketing materials, or opening an investment account for your company.
6. Hire A Professional
While you may be able to keep a handle on a business that you run by yourself, once you start expanding and getting employees or contractors to help, or once you have enough clients to keep you busy 40 hours a week, it’s time to hire a professional. Knowing that your finances are especially important in case of an audit and having all of the information you need at the ready when an investor comes knocking is worth the investment.
Depending on your business, this may mean bringing on a full time financial advisory firm (if you’re growing quickly or work with a global workforce), or consulting with an accountant to make sure your books are in order.
7. Don’t Neglect Your Own Finances
It’s easy to pour your heart and soul into your dream company, and it’s good to do so, as long as you aren’t pouring all your savings as well. Make sure to set up an emergency fund, retirement account, and get some kind of health coverage – after all, you’re not invincible.
Running a small business is no easy task, but it can be done if you stay organized and disciplined. As with all things, make sure you’re using common sense when you make decisions, and resist the temptation to make any huge purchases without consulting your finances first.