There are plenty of money myths to avoid when starting a business, but what are the right financial steps to take when starting out? It’s an important question to answer as you embark on your business beginnings! Today I’m sharing with you three important financial first steps to starting a business.
Especially if you’re planning to quit your day job or make your business your primary income stream, it’s important to establish a savings cushion. Start with enough savings in the bank to keep you and your business afloat for 3-6 months. The time period you aim for is dependent on your comfort level with developing your business into a healthy income stream. Even if you’re planning to start your business as a side hustle, saving can be helpful. It may enable you to work less hours for your other income sources, or give you a little start up cash for initial business expenses.
Speaking of business expenses, keep them low. Don’t fall victim to the “you have to spend money to make money” myth. The lower you keep your business expenses, the closer you get to creating a supportive and financially sustainable business.
Know Your Why
Focus on your “money why” for starting your business. Like I discussed last week in my article on saving, having a purpose and a plan for the cash your business generates is very important! Have a plan for your Profit. What are you going to use it for?
Even if you’re starting a side hustle, have a purpose for that income. Avoid the urge to simply inflate your lifestyle. Knowing your “money why” will help keep you more focused on your business and make the profits feel more purposeful and rewarding.
Take it to the Bank
Open a bank account just for your business. Do some research on the best business banking options before you commit to an account. Taking advantage of a good banking offer can start your business off on the right foot!
While you’re nailing down the banking details of your new business, make sure you also create a money system for yourself. Have a plan to pay off your expenses and also pay yourself. My recommendation, of course, is Profit First, which you can read more about here. If you’re considering starting a business, I highly recommend reading the first 5 chapters of the Profit First book, which you can download here on my site. If you find yourself intrigued, you can schedule a curiosity call with me to talk about Profit First and your business. You can also read my other articles on small businesses. A few that might be helpful are these ones on accounting for business expenses, invoicing your customers, and managing cash flow.
Wherever your business beginnings take you, I hope these three points help you take the first steps with confidence.
I first published this post over a year ago, but I thought August would be a good time to roll it out again, with our theme being transitions. If you have other business transition-related thoughts or questions, just let me know in the comments. I’d love to address them this month!
Images: Brooke Lark