3 Business Management Tips For First-Time Entrepreneurs
The 2021 IPO market has been an eventful one so far, with startups listed at sky-high valuations. Early investors have reaped large returns, meaning that venture capitalists have had more money to invest in new startups, shattering records for startup funding.
As we look towards 2022, there is still an abundance of up-and-comers amongst whom may be the next unicorn company. If you are in the early stages of entrepreneurship, or if becoming an entrepreneur is your New Year’s resolution, here are 3 business management tips for first-time entrepreneurs that can make all the difference.
Create A Business Budget
As an entrepreneur, your cash flow is the lifeblood of your business. Creating a business budget—an overview of your business’ finances—is a crucial first step to sound financial management. A business budget outlines key information on where your business’ finances currently stand and what you need to do to hit your financial goals.
Your business budget should help you identify where you can decrease spending or increase revenue, as well as how to set a profitable price-point for your products or services. To achieve this, you should categorize your expenses as upfront, fixed, variable and one-time, to give you a clear insight into your spending.
If you wish to land funding for your business, investors will also require a detailed business budget that outlines your financial trajectory.
Regularly review your business budget against actual results to ensure that you are on track and to help you save on unnecessary expenses. Don’t forget to include your tax obligations, and most importantly, always incorporate an emergency fund in your business budget. An emergency fund can allow you to continue your business operations in the event that your cash flow is disrupted without needing to take out a loan.
Organize Your Financial Transactions
In the early days of entrepreneurship, you may only need a few Excel spreadsheets to keep your books in order for filing taxes and to have up-to-date information on the financial health of your business. Here is a helpful method to record your expenses in a spreadsheet:
Rows:
- Name of the expense
Columns:
- Date of invoice
- Type of expense (filter): Office/home office utilities, website, product, packaging, shipping, software, marketing, payroll/freelancer payment, and/or other applicable expenses
- Vendor
- Invoice number
- Currency
- Amount of expense before sales tax
- Sales tax
- Amount of expense including sales tax
- Date of payment
- Method of payment
- Notes
If you meticulously record your financial transactions, you will avoid the panic of searching for information as your business grows. For instance, you may sometimes find it difficult to separate personal and business finances, and when it comes to tax season, could find yourself under great stress as you sort through your business and personal expenses for the information you need. You will find it helpful to process business finances through a separate business bank account, which will force you to categorize each expense as either business or personal as it occurs.
Start Lean And Don’t Scale Too Fast
Lastly, you should start lean and don’t scale your business too fast. You may be tempted to invest money into problems early on as quick-solves, particularly if you have started out with a large lump sum of cash. As a first-time entrepreneur, you should instead focus on prioritizing your expenditures and streamlining the business to avoid overspending. This will help you to avoid bad financial habits that will only worsen as you grow your business.
The Bottom Line
Good business management habits can have a tremendous positive impact on the financial health of your business, may be crucial to obtaining funding, and will reduce your stress as a first-time entrepreneur.
This content is provided for general informational purposes only and does not constitute financial, investment, tax, legal or accounting advice nor does it constitute an offer or solicitation to buy or sell any securities referred to. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this content should consult with his or her financial partner or advisor.