New Entrepreneur 101: Be Wise and Thrifty
Managing Your Business’s Money
It takes more than money to effectively maintain the daily operations of any business. The flow of cash, which is how money comes into your company, must be deposited into a business checking or operating account to help you to manage your business’ ability to maintain its operations. Every business has some level of income and every business has some level of liability. If a business that does not have enough money deposited into its business operating account, then the business will operate at a deficit.
I have counseled individuals who have started businesses and I have highly recommended that they monitor on what they are spending the company’s funds. I have found that some individuals will spend the income of their business recklessly and cause their business to suffer. As a new startup company, it is extremely important that a business owner spend the company’s revenue on items that are necessary and not on unnecessary personal use. Often time business owners of new startup companies apply monies to purchase new items rather than obtain used items. There are times that the new entrepreneur will placed emphasis on image of items rather than the necessity for items to establish the business. One may buy office furniture to establish an image and fancy decor rather than being thrifty and seeking out suitable used items to furnish a business that is a new start up. I want to emphasize to the new entrepreneur to be wise with the business’s income and to be thrifty on purchasing items and furnishings for their new business.
New and Shiney vs Wise and Thrifty
Years ago I met a young man who felt he had to have the latest gadgets in communicating with others. He had a beeper (yes, this was a long time ago) and a message pager that had just come out. He felt he just had to have this message pager and he paid quite a bit for it. He purchased a new printer and a copier. I tried to share with him the importance of buying only the necessities to start a new business and I gave him this example. My first copier only cost twenty five dollars because I shopped at discount stores and I sought out businesses that were going out of business. I tried to encourage him to also look at hospitals because hospitals keep a significant amount of used items in storage units. In fact, I was able to furnish my first business after establishing a positive relationship with a hospital contact. I was able to get office furniture; chairs, tables, refrigerators, pictures, lamps, all from this one facility. It is extremely possible to furnish your business, as a new startup, without spending thousands of dollars. Be wise and thrifty!
Line of Credit
When you are starting a business the first five years can be the most challenging financially, and I want to emphasize to you that there are some key items that you should do to prepare to obtain a Line of Credit. The Line of Credit can be used to cover cash flow shortfalls and will support the business to continue to operations effectively.
- Maintain excellent personal credit.
- Maintain excellent business credit.
- Develop a Business Plan.
- Make sure you have a bookkeeping or accounting system in place to track your receivables and expenses.
- Obtain a CPA to do an annual financial audit on the company’s financial records.
Brew Your Own Coffee
Lending institutions will evaluate the length of time you have been in business, the business credit history, your personal credit history, and the audited financial statements in order to determine if you and your company are credit worthy to be trusted with any financial support from the lending institution. So be wise and make sure you purchase only what is necessary for your startup business, do not spend excessive funds on personal use (a $4 latte five days/week will cost you $960/year). Add the $960 to your company’s bottom line and make your coffee at home. Be wise and thrifty, it will pay off in the long run.
Are you wise and thrifty? Share with us how you’ve saved money on business startup expenses.
For Executive Business Coaching contact Linda L. Smith at (951)442-2403. Visit my website at www.lindalsmith.com