Money Challenges New Business Owners Face, Part 3

Money Challenges New Business Owners Face, Part 3

Cash Flow Money Challenges

One of the money challenges new business owners can face is cash flow.  Cash flow can be a challenge for any business, but especially new business owners.  You simply do not have much to work with.  

We will assume for simplicity that you are just thinking about forming a business.  If your business is currently operating, pick up where your business is currently at.  

When you are just starting or thinking about starting, we suggest that you decide on how much you are going to invest, deposit the funds into your new business account and then work inside of those lines. 

If you have started a business and are bleeding money, then you should do the same.  Decide how much you are going to invest today and make it work.  Once you make that decision – DO NOT get to the end of your funds and say “I am going to deposit just a little more” and then 2 months go by and you need a little more.  It will suck you dry. 

You need to commit to making your business work with the funds you have!

We know it’s tempting, but we want to caution you to stay away from using a credit card to get started.  Our experience with using a credit card to get your business started is that you are unable to pay off the balance monthly and so it creates a vicious cycle.  You are swiping away; the balance goes up, yet you don’t want to look at it because it is scary… so you just charge more.  

There is often a disconnect with credit cards.  You are spending but don’t realize how much you are spending because it is not coming from your checking account.  You may say – but I want the points.  The points are never worth losing your business.

Now that you know how much you have to spend, review the list of expenses needed to get started for the first 6 months.  Know your industry, so that you can make sure that you have enough funds to get started.  If you have enough for 4 months, you have 2 choices. 

1. Wait until you have 6 months worth before you start or

2. Take a look at your expenses and see if you can cut back.

Do not start a business if you do not have enough money, rarely do they succeed.

Honestly, as a new business owner you are going to have to be crafty and incredibly creative to overcome cash flow money challenges.  You need to keep things as simple as possible.  For example: You may feel that you need accounting software to keep everything straight, but we suggest you save your cash and use an excel sheet to start.  

We all can find things to spend money on, but you have to make every dollar stretch as far as you can when starting a business.

If you have not taken this step already, don’t delay any longer!  It may save your business.

Speak to an accountant to review your numbers.

An accountant will be able to tell you if you are missing any expenses or if your estimated amounts are correct. They are also a great sounding board.  They have helped hundreds of businesses and can share their experiences with you and give you good feedback.

We have one more item that still needs to be addressed:  It usually takes longer than you expect to get your product/service off of the ground.  

This messes with your cash flow.  Now that you know this, you can plan for it.  If we go back to when you were estimating your expenses to get started you should consider adding some additional months if they are needed. 

For example:   If you initially expected that you will start producing income in 6 months, estimate for 9 months instead.  The worst case scenario is you have money flowing before then.

If you have any questions, please contact us!  We are here so you can get started on the right track!