Top 5 Financial Hacks for New Entrepreneurs
Entrepreneurs start their business to create a niche market – for their brand and their selves, of course. While there are financial goals to achieve – breakeven and then earn profits, the business needs to have a robust base to survive, sustain and grow in a very cut-throat and aggressively competitive landscape. It typically means that entrepreneurs, to a great extent, need to focus on the financial aspects of the business. Easier said than done; this is one feature of a business that can get quite complex and perplexing for the entrepreneur – many enterprising people run away from the thought of entrepreneurship because of this one aspect. However, there are hacks for setting up an optimized financial management plan to manage and control your start-up company’s finances, too, just like there are hacks for everything else in life. If done the right way, entrepreneurs can enjoy a long successful run of entrepreneurship and become examples for others to follow.
An example to illustrate
The rags-to-riches life story of Steve Jobs is the best example. Partnering with friend Steve Wozniak, both the Steves started their business by making blue box phone breakers – the technology helped people call free in the US. It was not long before the double-Steves left the blue boxes and moved onto kit computers to make Apple I that helped make personal computers. All that the buyer needed to do was add a monitor and a keyboard! When the duos were ready to make Apple II, their project gained momentum and had the hobbyist market show interest. After Apple II was launched, the duo successfully got venture capitalists to invest in their company. It was 1976 and that marked the beginning of an illustrious brand – a landmark event because this was the year when Apple was officially registered.
While Steve Wozniak was the genius brain behind all of Apple’s technical prowess, Steve Jobs’ visionary skills as a leader and entrepreneur heralded success stories, one after the other, at Apple. It took only four years for Apple to go public. There were few years when Jobs was out of a job because he was ousted from Apple, but that did not stop him from being enterprising. He made some investment decisions that turned out to be favourable; for example, his decision to invest in Pixar struggling to stay afloat in 1986. However, Pixar became a name to reckon with in digital animation not too long after, which added billions to Jobs’ equity.
Steve Jobs is a man to look up to because of his insatiable hunger and thirst to keep inventing and re-inventing. The man was not ready to stop at anything, especially when obsessed with technology and computers. His return to Apple when the company had started to flounder could not have been better timed. He successfully got a $150 million investment from none other than Bill Gates himself to turn the tables and fortune. It started a series of top innovations – the iPod in 2001 and the iPad in 2010. Today, Apple is every entrepreneur’s dream and not just that – Jobs’ story is inspiring and has key lessons to learn from.
Innovation backed by robust marketing, enthusiastic spirit, and self-confidence can be your rags to riches story too. Where finances are concerned, here are 5 hacks that you must follow arduously to create your success story.
Hack No. # 1 – Plan your financial goals while deciding the vision, mission, and organizational goals
A key aspect of financial management, especially for start-ups, is that they enthusiastically have a vision, mission and organizational goal but have no clear-cut financial goal to start with. While one may say that the financial goal is an inherent part of starting a business, why does one need to set a separate goal – it becomes crucial because, just like everything else, there needs to be a precise and concise plan that helps achieve the financial goals.
Only when you set a goal, year by year, will you make a financial plan, year on year, to achieve it. There need to be short-term goals and long-term goals. Goal-setting is an essential step so that every single objective has a timeline to it, and you can track the efforts or progress towards achieving the same. Overall, it makes your business plan and organizational goal more achievable and realistic because the financial goal is innately intertwined with both of these.
Some entrepreneurs are so meticulously driven that they do not mind having weekly or monthly financial goals – each small success paves the path for bigger achievements. Since financial goal setting and planning is serious business, it is advisable to consult with experts offering proficient Financial Consulting or Financial Advisory Services so that your goals, business or finance are realistic, futuristic and progressive.
Hack No. # 2 – Watch out for your credit score!
An essential part of a Financial Management plan is to have investors pump in money into your start-up venture. The fact-of-the-matter is that for most entrepreneurs, the beginning is a tedious work uphill, with the shortage of funds being one of the major issues. To ensure that you attract the right investors to your business, you need to maintain a healthy credit score.
It is no rocket science that the higher the credit score, the better the chances of getting qualitative funds and investments from external parties. Typically, it means that as an entrepreneur, you need to be on the top of the finances of the business and ensure the creditors and debtors of the business are soundly balanced so that there is negligible scope of your credit score getting affected.
The best thing to do is to have a financial advisor offering proficient business or management consulting to study your business’s financial position and advise ways and means to keep the credit score high.
Hack No. # 3 – Cashflow management should be your Top Priority!
Most start-up entrepreneurs invariably spend a lot more on things that they had initially budgeted for – in the process, eating up vital cash, pressurizing the business’s operations to a great extent. Also, some entrepreneurs have very amicable credit policies giving their clients months and months of credit or not following up on outstanding payments. All of this can hurt their cashflow terribly.
It is critical to keep a check on what is going out of the business account and what is coming in. If your business is badly dependent on regular cash flow, you need to prioritize cash flow management before anything else. At any given time, you should have exact details of the cash currently available. If you are a small business owner, ensure that you have complete control over your business’s cash flow, even if you have a full-time accountant to do the work.
Hack No. # 4 – Your personal finance should be separate from that of the business.
Entrepreneurs often make the mistake of keeping all the finances combined – in one account, all expenses and earnings from the same account. In this way, they are clueless about what happened to the business finance by the end of a year.
Remember your personal finance and business finance are two separate entities. Even if, in your mind, they seem to be one, it is important to separate them on paper. Because if you fail to differentiate between the two, you will never be able to understand the business performance for the given period. There will be no proper and reliable data on the earnings and the expenses of the business. Without this data, you can never make a financial management plan for the next year or period. Without the plan, the business’s survival can become a big question mark in no time – leave alone being a success.
By keeping both the accounts separate, you can optimize monitoring and tracking personal and business expenses and earnings separately, helping you plan the future better – for the business and yourself.
Hack No. # 5 – Ask for professional help.
Being an entrepreneur is a big challenge, and if you have plans of becoming a success story like Steve Jobs, you need to understand that there is a lot on your plate already. The last thing you need on your plate is to prepare the financial management plan and keep working on it. Risk management, funding, taxation, investments, insurance, cash flow management, and more to keep your business financially healthy can be too tasking and overwhelming.
Why not have financial experts do it all for you? Hire In-house consultants/External consultants during those tumultuous first few years to tide through the difficult period and set sail on a productive future.
Starting a business is like starting a new life – it takes a lot of courage and grit to become an entrepreneur. However, the real challenge starts only when the business starts. Follow these hacks for managing your business’s finances well because it is one of the most critical pillars impacting your business’s success or failure. Remember to seek help or speak to experts if you seem to get lost or managing the finances on your own becomes an upheaval task.