Starting up a new business presents a variety of challenges that not only extends to the physical and mental side of things but also to the financial facet of the professional endeavor. Business planning and market studies involve intricate methods that need a lot of mental fortitude. The truth is that establishing a start-up business requires ample amount of time and actual physical presence for any involved business owner in order to check if everything is going as planned.
The bottom line is that one of the most important factors to check is whether the business’ finances actually balance out. Simply put, money and financial management eventually become the deciding factor if starting a business is feasible in the first place.
Start-up business owners and aspirants alike are having a hard time finding out solutions to the challenges of these hard economic times. This is the main reason why anyone who’s aspiring to be a success in the field of business should look to inform themselves about some important financial tips that can actually make a difference in their work. In this regard, these financial tips and tricks that for startup business owners can help guide the any entrepreneur find their footing in the business world:
Financial Management Starts Personally
One thing that stands out as a part of the basics for any successful business is that a business should minimize expenditures and maximize profits. Business owners do the best that they can to cut luxurious services or even redundant equipment in their establishments, while still producing at the optimum level.
Then again, being money-smart is not a one-time thing if a person really wants to be a significant player in the market. It should be part of a consistent attitude that roots from culturing one’s self to be financially wise. Thus, financial management starts personally.
Financial advisers would always tell their clients that there are a variety of ways on how to handle their finances. It should take into account both the present and future of one’s money management.
This is where saving comes in. Saving is an important facet in everyone’s financial status. This is highly critical especially when financial problems arise or the business may not be going too well. In fact, these unfortunate circumstances serve as the perfect moment when saved money presents its best benefit.
An alternative method of saving is investing. Investing is an integral for any individual, especially for those who wants to make it big in the long run. As such, investing early is much more preferred since money does require time to grow.
But where does one invest?
Banking is the most common used approach for saving money, and is in fact a form of investing in itself. Over time, money saved in a bank account can accumulate interest. Similarly, investing money in the stocks market can also be an option for those who want to involve themselves in trading.
While everything mentioned above tackled gains, financial management also puts a highlight on considering future events like retirement. Being able to get an individual insured is one of the better things when it comes to finances. Getting an insurance policy which entitles a person financial protection or reimbursement against losses is imperative for a money-smart individual.
Taking this into consideration, insurance serves as an individual’s protection from the risks of financial losses, damages or liability from damages caused by a third party. Insurance companies can vary in wide arrays, but the most significantly popular ones involve health and protection. The truth is that rigorous medical examinations are involved in getting the actual policy, but smarter people opt to take advantage of no exam life insurance which is much simpler.
Whatever form of investment one opts to go for, at the end of the day, using money to earn more money is a good set-up for any business.
Breakeven is not Necessarily Bad
The ultimate goal of any business is to gain profits consistently. However, before any real gain happens in a business, the inevitability of losses should also be considered since business may not be flourishing every time.
Losses are particularly hard to take especially for starting businesses, since it might bring about professional discouragement. While there are various possibilities in business, there comes a point when everything just ends up leveling to zero –no gains, no losses. Simply put, breakeven.
The bigger question now presents itself – is breakeven bad? The answer is not necessarily so. The actual decision whether it is good or bad comes from the circumstance it is in. If breakeven points come at a time when the business incurred losses from the months before, then it might be a good thing. If a business is consistently breaking even from the start, then it may be time to rethink about the business model of one’s establishment. Breakeven is studied deeper in economics. This is called break-even analysis.
Break-even analysis is used to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even analysis calculates what is known as a margin of safety, the amount that revenues exceed the break-even point. This is the amount that revenues can fall while still staying above the break-even point.
Break-even analysis is a supply-side analysis; it only analyzes the costs of the sales. It does not analyze how demand may be affected at different price levels. The break-even point is the point at which gains equal losses. Reaching the break-even point is a business’s first step toward profitability.
Good Profits with Better Business Partners
Establishing a new business is not always a one-man team. Often times, it comes as a result of collaboration from business partners with the same goal: to gain higher profit. Business partnering is not new. However, as today’s business world becomes more uncertain and more volatile, the imperative for business partnering is greater than ever.
The Chartered Institute of Management Accountants (CIMA) defines business partnering as a finance professional who works alongside other business areas, supporting and advising their strategic and operational decision-making through insights that drive better business. The speed and quality of decision-making is becoming increasingly essential to a business’ success, and may actually be that competitive edge they need. New research with senior executives from around the world identified a common need for faster, better decision-making processes.
Real business value is created through knowledge, intellectual property, collaboration and partnerships throughout the company. Now, more than ever, financial leadership has an opportunity to contribute tangibly to the success and future of the business. However, they can only do this successfully if they are effective business partners, which require a special set of both technical and behavioral skills: an understanding of the business and what is actually driving the numbers, as well as good people and leadership skills.
Before anything else, getting a good business partner should be done carefully and with proper thinking. Because partners join forces for a variety of reasons and expectations, sometimes, the strengths of each individual may be overlooked. The most obvious strengths are evidently recognized; however, underlying strengths, when effectively brought out, can often make a big difference in long term motivation, commitment and success.
Each person in the partnership has his own reasons for being in the business endeavor. Sometimes, people seek a partner for capital, expertise, and even connections. These are not always expressed, yet they remain as an underlying expectation. If the expectation isn’t met, the relationship can become strained.
Because each person’s expertise, motivation and personality are different, it’s important to have this discussion before anything is committed contractually.