Entrepreneurs start businesses for countless reasons. Yet, at the end of the day, all for-profit organizations exist to make money. After all, businesses are not charities –– their function is to produce capital. The bad news here is that while many first-time business owners may have a solid understanding of their product, customer base, and industry, they may not be financial experts. Given that fact, today we’ll share four pieces of important financial advice for inexperienced business leaders. Keep this list handy –– you’ll be glad you did so!
Keep Personal & Business Finances Separate
While it may be tempting to use personal capital to pay for certain business expenses, this is almost always a bad idea. For one, mixing your personal and business finances will make it more difficult to manage both. Second, using personal funds for business purchases prevents your company from accruing credit over time, which could be crucial to securing a loan later. Lastly, using your own money or resources to cover business costs could leave you vulnerable should your company fail.
Prepare for Business Loans Before You Need Them
Lots of business owners are reticent –– at first –– to seek out business loans. Still, 40% of business owners applied for loans in 2017, and millions more will continue to request loans in the future. That’s why all new business owners should prepare their business to take on a loan even if they don’t plan to in the near future. By building up business credit, paying off debts, and forming detailed business models, business owners can ensure that they’re able to access extra capital at a low-interest rate when they need it most.
Research Significant Purchase Decisions
It’s understandable that many small business owners want to invest in technology to boost employee performance. After all, having the right equipment can give a new company a significant edge. On the other hand, though, spending heavily on tech purchases that don’t pan out can hamstring a company and set it back massively. As such, new business owners should seek out informative resources, like this pharmacy POS checklist for instance, before they pull the trigger on a serious investment.
One lesson that many business owners have to learn the hard way is that rapid success is rarely sustainable. Indeed, just because your company has made progress, it doesn’t necessarily mean you should try and expand into new areas or demographics immediately. It’s possible to spread your resources too thin. Furthermore, rushing to grow presents its own set of problems. Ultimately, business owners must treat success with a certain amount of skepticism. Scaling carefully isn’t particularly exciting, but it will prevent you from putting your business in a precarious financial situation.