Starting a business is considered as a way to achieve not only financial independence but also personal independence. According to Christophe Estay, Francois Durrieu, and Manzoom Akhter (2013), personal independence is one of two motivators for entrepreneurs (p. 1) with hopes “that their business will bring them concrete financial and material results” (p. 20).
Individuals who seek to achieve personal and financial independence can try their luck in entrepreneurship. However, preparation is essential to successfully launch a startup and achieve financial goals. This article provides valuable pieces of financial advice for starting a business.
1. Consider Employee Benefits
Many aspiring entrepreneurs hoping to achieve financial independence come from paid work or earning through wages and salaries. Before venturing into business, it is essential to take a look at the current compensation package they are, including their salary, health insurance, reimbursements, retirement matching plans, and allowances.
Individuals who decide to establish a startup will lose the benefits they have been getting from their paid work. Instead, they will be earning their salary and benefits from their business, which means that they need to cover their own compensation package, as well as their employees’.
2. Create a Robust Plan
Building a business plan is the first step toward starting a business. The Small Business Development Center of Duquesne University (2019) describes a good business plan as one that “not only helps entrepreneurs focus on the specific steps necessary for them to make business ideas succeed, but it also helps them achieve short-term and long-term objectives.”
The process of creating a business plan involves in-depth market and industry research, complete with realistic milestones and budgeting.
3. Think of Funding Sources
Funding the business is one of the most challenging parts of creating a startup. Some funnel their savings toward their businesses while others take out loans. Another option is to look for investors who would be willing to bet on their startup.
The key is presenting an attractive business plan. A winning business plan should present the project in a clear, accurate, and attractive manner.
4. Minimize Fixed Expenses
Reigning in the fixed expenses is important to increasing the business’ chances of staying alive in a competitive industry. These expenses include office rent, amenities, and perks like meal catering. Lowering these costs and eliminating them is the best way to start. Then, entrepreneurs can gradually add perks and overhead costs once their business grows.
5. Establish Realistic Financial Goals
Entrepreneurs might seek overall goals such as personal independence and for their company, expansion, and growth. However, it is better to list down measurable objectives that are reachable and realistic. Outlining revenue milestones every month or week is more achievable compared to generalized and unworkable statements.
6. Focus on Finding Clients
Businesses start earning when they find their first paying client. This is how businesses get feedback, which can be used to improve offerings and marketing strategies. Feedback, in the form of reviews and recommendations from customers, can be a powerful tool to acquire more clients. From there, business owners can start exploring the target market, get more customers, and in turn, get more feedback.
7. Create a System for Receivables and Payables
Cash flow is one of the most important aspects of running a business. It refers to the cash coming in and going out of the company. Even at the budding stage, businesses will be dealing with numerous receivables and, especially, payables. Having a clear and easy system for receivables and payables can make it easier to monitor which accounts are open, making the process of sending invoices and make payments much more manageable.
8. Leverage Technology
One of the best ways to manage cash flow is by deploying software designed to handle payables and receivables. Many modern applications provide accounts monitoring and automation, allowing entrepreneurs to track every account and settle them.
9. Make Projections
Making financial forecasts is important for businesses, even after the planning stage. This allows entrepreneurs to weigh the various factors that can affect their business and its cash flow.
A study by consulting firm PricewaterhouseCoopers (2011) revealed that this is becoming an established practice because it offers insights on changing business landscapes. The report said, “The concept of continuous forecasting based on changing business conditions (versus predetermined monthly or quarterly projections) is hitting the right chords both with finance and operations” (p. 3).
10. Prepare for Misfortunes
From the start, entrepreneurs take risks to establish a business. Risks continue to exist even after the startup has been launched. There are a lot of external factors that can affect the economy and businesses. One example of this is public health emergencies that can cause the economy to slow down and grind to a stop. Being financially prepared for such risks can play a role in keeping businesses afloat.
Launching a startup can lead to personal and financial independence. To increase the chances of achieving such goals, following these tips is a great move.
Estay, C., Durrieu, F. & Akhter, M. Entrepreneurship: From motivation to start-up. J Int Entrep 11, 243–267 (2013). https://doi.org/10.1007/s10843-013-0109-x
Do you really need a business plan? (2019). Retrieved from https://www.sbdc.duq.edu/Blog-Item-The-Importance-of-a-Business-PlanPricewaterhouseCoopers. Financial planning: Realizing the value of budgeting and forecasting [PDF file]. (2011). Retrieved from https://www.pwc.com/my/en/assets/services/realizing-the-value-of-budgeting-n-forecasting.pdf