It’s finally here. You’re ready to take the leap and launch the company you’ve been dreaming about, but you’re committed to doing it right – you’ve heard most start-ups fail in their first year, after all. There’s things to learn and your finances to get in order before you begin and with that in mind, we’ve gathered together some straightforward fundamentals you’ll need to have addressed before you commit.
We’ll cover your finances as they are, common expenses and how to plug any gaps your audit reveals. Let’s take a look.
Table of Contents
Keep it simple: Start with what you have.
Most adults aren’t superhuman savings robots and that’s OK. Even the most studious amongst us don’t always know exactly what’s going in and out each month and it’s a logical starting place. We’re assuming here that you’ve got a job at the moment to keep you going financially – or you’ve got enough savings to live on for as much as a year before your cashflow starts to grow and stabilise.
So, audit yourself. At this point, you’ll want to consider the sales and life ‘cycle’ of your planned business. How long do you think it’ll take for you to bring in your first clients or customers – and how many do you need to reach a liveable income or a level of income that slows the pace at which you eat into your savings?
This will vary from venture to venture. If you’re starting up a ‘subscription as a service’ or SaaS business, you might be able to invest in paid search advertising on Google, Bing and LinkedIn to bring in rapid initial sales. If your company produces actual products and requires manufacturing capabilities, your path to initial profit will have more hurdles and will take longer to navigate.
Be mindful of these common sources of expense as a business owner.
Nothing will sink your venture faster than a sudden expense you didn’t plan for. Most new business owners rely on their planning and forecasting to be reasonably accurate in their first few years; get that planning wrong and get hit by a sudden mandatory expense and you’re in deep trouble. Here are common expenses for new business owners. Take a look at them all, see if any apply to your planned business model and account for any that do.
Insurance: Depending on your service and any risk or liability involved, you may need varying kinds of insurance. Some of these can be expensive, such as employer’s liability packages or professional indemnity insurance. If you have a varied risk profile, you might need to get an insurance package tailor-made for you.
Premises and equipment: If you’re planning to lease or rent commercial property, you’ll want to be laser-focused on understanding your costs for utilities, refits and equipment including internet, telephony, data storage and electronics.
Staffing: Many businesses use freelancers as they grow, but you might instead want to consider full employment. How much does flexibility matter to you and how much can you afford? Are you ready to pay to advertise your vacancies or to take on the services of a recruitment agency?
Marketing: Digital marketing is the modern go-to for expanding a new business. Do you know what channels of marketing suit your business best, such as paid advertising or an SEO-focused long-term growth strategy? Whatever your poison, you’ll want to appraise local agencies and get quotes from them.
Once you know what you need, plug the gaps.
It can be intimidating and often disheartening to perform an accurate audit and prediction of your present financial state and expected costs but don’t shy from it. If you find yourself falling short, you’re in the same place many successful businesses have been.The answer? Look at how you can secure additional finance. Even if you’re an adult with everyday bad credit, it’s still possible to obtain loans that will give you access to the services and people you need to get growth going in your first year. Good luck!
About Carson Derrow
