They say you need to have a lot of courage to run a business. We believe this is true because new business owners have a whole host of risks. After conducting a little research, we found out that magazines such as Small Biz Trends suggest that about a third of all new businesses fail within the first year.
The most common cause for this shortcoming is a lack of financial stability, so to avoid being one of these businesses, it is essential that you secure your business with a certain amount of financial backing. In this article, we want to cover the financial stability of businesses and provide a few useful tips to achieve that status.
What Does It Mean to Be Financially Stable?
When we say financial Stability, we are essentially talking about covering all the necessary expenses for you and your business. It means not having to worry about where the money will come from to pay rent, utilities and employee salaries. Of course, it is always best to get this financial stability from your own personal finances. To do this you need to prepare first before starting the business. However, in many cases that is not always possible.
Monitor Your Finances
Consistent monitoring of all of your finances, both business and personal, helps prevent you from being unable to cover unexpected costs. Plus, having the confidence of knowing you can make your payments gives you the peace of mind to think of solutions and grow your customer database. It is always important to know how much money is coming into the business and how much is going out.
Create an Emergency Fund
Having an emergency fund to fall back on in case your income falls below normal is absolutely critical to the well-being of your business. These are funds that can help fund your expenses during the early days, slow months or when you do not have a steady cash flow. A good idea is to set aside enough money to cover at least three months of your expenses when starting your business.
Operate Below Your Means
Live below your means while you get your business off to a good start. Making a habit of doing this can help you avoid overspending. Do the same for your business. You may need to spend more resources to meet your business needs as you expand but you need to do this in proportion to your business growth. In other words, you need to be careful with your $$.
Consider a Business Loan
At some point, you may want to find one of the best small business loans you can find. There are a number of financial institutions, lenders and banks which can help small businesses with loan options. Some financial institutions ask for some type of guarantee, while others will offer a few different types of loan options and will not require financial backing. It is just a matter of finding a business loan that fits your needs.
Owning a small business can be very rewarding. It gives you the independence of being your own boss and personal satisfaction in helping others. However, the first thing you need to think about when starting a new business is financial stability, otherwise, your new enterprise could be very short-lived.