New entrepreneurs often find themselves in a peculiar situation, unlike any they’ve ever faced. Of course, proper preparation processes can help ease up things a bit. However, most guides aimed at first-time entrepreneurs focus on two topics – fundraising and cash flow. Needless to say, these two issues are vital, nonetheless, they’re not the only problems that a new entrepreneur is bound to face. In order to prepare you for some additional ordeals of the business world, here are five important finance tips that every new entrepreneur should hear.
Carefully choose investors
The first massive trap that the majority of new entrepreneurs walk straight into is not choosing their investors carefully enough. In most scenarios, an outsider looking to make their mark on the business world will be so desperate for cash that they’ll be willing to accept money from anyone who’s willing to pay. This is a trend that solves your short-term cash problems but creates new problems further down the line. Finding investors with a different vision or values than those of your own is a dangerous trend, one that has to be dealt with accordingly. You can even look at traits like temperament, judgment and portfolio in order to figure out who you’re dealing with.
Don’t overinvest in a single venue
The next thing worth keeping in mind is the fact that you shouldn’t overinvest in a single venue as soon as you receive some profit. Sure, reinvesting might seem tempting, even logical as a course of action. However, what if this trend of growth doesn’t pick up? Moreover, once their business really takes off, they sometimes decide to start spending on themselves or even decide to buy the property their office is currently situated in, in order to save money in the long run. In theory, the rent money alone would, eventually, cover the cost of your investment.
Neither of these choices is as wise as it sounds because A) as a young entrepreneur, you need all the cash you can get at your disposal and B) you never know when your luck can turn around. Moreover, the building you decide to purchase might soon be too small for your expanding business, which means that you will have to move. Still, an investment in real estate is seldom a bad idea, nonetheless, those looking to diversify their portfolio probably have a better course of action available. For instance, if you decide to buy gold, you’ll have a much more versatile list of assets. First of all, it’s easier to sell if you’re ever in desperate need of fresh capital. Second, it’s harder to keep track of and third, it abides by different rules of the market.
Technology reduces overhead
For a small company, cutting costs is one of the most important things. Nonetheless, a lot of new entrepreneurs do this the wrong way around. Sure, paying for a premium platform is an expense you can do without. However, tools reduce labor. With adequate HR software, a single HR representative can do the work of an entire department. In other words, by trying to save money here, you might end up increasing your overhead. This is why you need to make an estimate of what you gain, versus how much you pay for it.
Deductibles can make all the difference
Not knowing what deductibles your company is eligible for puts you at a clear financial loss in a situation where every single dollar counts. This alone should be a reason enough for you to hire a professional accountant. For instance, running a home-based business is much cheaper if you know that you can deduct a part of your utilities as the cost of running a business. In a scenario where your home-office takes about 10 percent of your home, you can deduct as much as 10 percent of your utilities. For this to work, the office would have to serve a single purpose, which means that bedroom- or closet-offices are out of question. Sadly, the majority of new entrepreneurs remains completely oblivious to this fact.
Roleplaying helps with problem-solving
Whenever you’re in a tight spot, you might find that roleplaying can help you immensely with your problem-solving. Imagine a scenario where you had to create an elaborate digital marketing campaign with very limited resources. Wouldn’t it be helpful to put yourself in a hypothetical situation where you didn’t have any marketing budget, whatsoever? Which methods and techniques would you have available in this fictional scenario? Now, to proceed, you need to ask yourself whether any of these methods ask for more effort than you have on disposal. Remember, time is a finite resource as well, which is why “time is money” is one of the most commonly used proverbs in the business world.
With these five tips on your side, you’ll find your small businesses’ finances much easier to handle. The most important thing here lies in the fact that by helping you become more efficient at managing your company’s funds, you’ll also alleviate a lot of stress. This will help clear your mind and keep you focused on tasks that lay ahead. In a scenario where so much depends on you, this couldn’t be more vital.