Successful entrepreneurship - the basics of money management

19th February 2015 Business 1167
Successful entrepreneurship - the basics of money management

We all know the old adage “it takes money to make money”. For entrepreneurs however, while similar, that old adage should be changed to “it takes proper money management and excellent control of your cash flow to make money”.

And the truth is...

That there are a few mistakes that can cause a business to close up shop faster than improper money management. Many entrepreneurs make the mistake of starting their business without enough capital, which can kill a business before it even starts. Others raise plenty of cash but manage it poorly, making mistakes and wasting it on the wrong people and/or the wrong promotions (among other things).

If you've done it correctly, none of the costs for any of these things should be a surprise because you've already seen them on your business plan.

In order to have the best chance of surviving the first 1 or 2 years, which are critical, a well-thought-out business plan is definitely necessary, one that looks at every expense and as many possibilities as possible for how money will come in and, more importantly, go out.

After startup capital has been raised, the next step is to properly (and patiently) plan out every step that you make, especially when it comes to renting a location, hiring people, purchasing stock, marketing and advertising and purchasing whatever tools and/or equipment you're going to need.

If you've done it correctly, none of the costs for any of these things should be a surprise because you've already seen them on your business plan.

Make sure you have an emergency fund

Controlling expenses is the next most important step, especially after the business has started rolling and (hopefully) customers are starting to appear. Don’t take on new employees to quickly, keep a very strict eye on your suppliers and take advantage of discounts when you can, and do your very best to keep up with all the bills your business is accruing.

An excellent idea is also to put money aside as you grow as a sort of “emergency fund”. Individual consumers do this but entrepreneurs usually don’t. The fact is however that the day will come when something breaks down, an accident happens or an unforeseen expense pops up. Having some emergency funds set aside to cover those expenses will allow you to keep functioning normally and continue taking care of customers.

And remember to pay yourself!

By the way, even though most new entrepreneurs throw all of their earnings back into the business, remember that you also need to pay yourself.

Possibly the best bit of advice that we can give when it comes to money management and cash flow as an entrepreneur is this; if you’re not very good at it, definitely consider hiring someone to handle money management for you.

As an entrepreneur you need to learn how to delegate and, for something this vitally important to the survival of your business, delegation is sometimes your smartest move.

If you need assistance with managing your money, contact one of our consultants to discuss further. If you have any questions, please get in touch or leave a comment and we'll be sure to get back to you with advice and information.

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