5 key money tips to start your business and not fail in the attempt
April 12, 2022
Creating a business anywhere in the world is a titanic task, and at the same time an admirable one. It is not enough to generate an innovative product or service that is creative, practical, necessary and eye-catching; it is also key to learn how to manage money.
According to the U.S. Chamber of Commerce, there are 31.7 million small businesses in United Estates, which combined account for 99.9% of all U.S. businesses. Many small businesses start up every month, but the failure rate is high. As of 2019, startup failure rates were around 90%, 21.5% of startups fail in the first year. This failure is not precisely because they are not successful in sales, but simply because the entrepreneurs do not know how to manage money, keep accounts or budget.
For this reason, we present below a series of financial tips to help entrepreneurs reach their full potential in their projects.
1. Keep your records up to date
It is crucial to keep your records organized and updated, although it may seem a time-consuming task, you will thank yourself in the future. Record in an Excel document or in a specialized software -if you have the possibility-, the seed capital, expenses, income, projected and actual profitability, among others.
2. Define your financial objective for the year.
It is vital to define a concrete and specific goal for your company's growth. Try to define an amount of revenue that will allow you to breakeven if the dynamics of your business allow it; it should not be a very ambitious goal, but it should not be an easy one to meet either. That way, no matter what challenges arise, it will be much easier to focus your efforts on the goal you have set.
3. Don't misspend seed capital
Start small and build from there. Make small market assessments with the products or services you launch, make adjustments, and again launch tests to the market, start the process with the minimum viable and increase the requirements, price and profit margins according to the behavior of your sales.
4. Always have cash flow
The cash flow allows us to know quickly the liquidity of the company. It identifies the feasibility of growing the company, expanding it, and even investing in new projects. A positive cash flow means that the money that came into the company was greater than the money that went out.
5. Tax planning
Planning to save each month to pay your taxes is a strategic decision that will allow you to always keep this expense in mind and avoid penalties. The best way to plan your taxes is to hire a CPA. This professional will inform you about the different types of taxes and will make sure that you do not have to incur excessive expenses for penalties that could have been avoided.
Approximately 9 out of 10 businesses fail. That's a high number, indicating that many things need to go right for a business to succeed. Fortunately, you can be one of the 10% that succeed in the first year. To do this, you need to follow the tips outlined above, and, most importantly, you have to test your idea, do your homework, and make sure it will work before you jump in with both feet.