How to Survive Until Your Business is off the Ground
Starting a new business can be a daunting prospect. It can be a number of months, even years before a new business starts generating profits and creating a steady cashflow. During this period, it can be easy to get down hearted and give up. However, this does not have to be the case. You may need to find alternative sources of income during this lean period. This is nothing to be ashamed about, but it is a challenge that must be overcome and CAN be overcome. When the business starts making a profit, it can be reivested in the business to make it grow. The following tips can help a business during this time. It will help you to calculate what you need financially, streamline your expediture, re-invest any profits and perhaps find further funding and grants for your business.
First and foremost, when starting a new business, make sure that you make a REALISTIC forecast of your financial needs. Please refer to my article on this subject. A personal budget is a plan showing living as well as business expenses. It should set limits about how much you spend and how much you will have coming into the business. This will help you to keep tabs on how much is going in and out of the business and adjust accordingly. Do not forget that some things are fixed such as rent/mortgage whilst others change from month to month like phone bills, travel etc. See where you can make savings. The first year in business is crucial and some sacrifice may be necessary, so don't be afraid to make them.
You must identify how much your business will make in the first year and how much profit that you plan to make. It is possible to do this by:
- Estimating how much you will make from sales
- Estimating how much your expenses will be
- Calculating any salaries, tax, etc and seeing how much is left
It is sometimes difficult to calculate how much the business will make in the first year. The best thing is to concentrate on managing cashflow rather than profit.
Profit -is the difference between business earnings and the costs paid out during the course of the trading period. A profitable business can still be in trouble if it runs out of a cash.
Cashflow - is the money coming in and out of the business. It covers payments of money and not what is owed to and by the business. Cash enables bills to be paid thus allowing trade to continue. Wages, rent, equipment are the main things that cash is spent on.
It is important to point out that if you are extending credit or are in receipt of credit to have important controls in place.
The other thing to consider is how to make savings. The best way to do this is to shop around for the services, loans and deals on your utilities. Always read the small print and make sure you understand what you are getting for your money. In addition to this, make sure you adopt money saving practices in your business for example not leaving appliances on and only switching on the heating when it is needed. Furthermore, you can save money by running your business from rather than renting or buying a premises.
Other sources of income include:
- Using savings that are available to you
- Starting the business whilst retaining existing employment - it can be done
- Selling unwanted stuff
- Getting financial help from friends and family but be careful. Family financial contribution can lead to problems if clear guidelines are not put in place
- Business funding/overdrafts - but try and keep these to a minimum especially the latter as debt is not a good thing for a business to be saddled with long term.
Lastly, always look for support from schemes and grants run by local enterprises, business angels etc. It is there should you need it. It may not always be easy getting past the first year in business but it can be done with a little hard work, sacrifice and innovation.
Take care readers and all the best...