Congratulations on starting your Business. Like millions of small businesses in this country and around the world, you are the backbone of the economy. And while businesses like yours are referred to as ‘small business’ or ‘small and medium scale enterprises’, your business is practically the center of your world and is indeed a big business to you.
Therefore it is important to have a great deal of financial planning for your business because you cannot afford for it to fail. If this is not your first time starting a business, you will admit that failing sucks. Yes, there might be lessons to learn, and experiences to be had, but will we rather not fail?
Something that can reduce greatly the chances of failing is financial planning for your business.
In this post, we will share tips on financial planning for your business, that you can apply practically to ensure you succeed, remain in business, and grow steadily.
Separate Personal Money from Business Money
It is important to separate your personal money from your business money. Your business is a separate entity from you and should be treated as such. Open a business account where the money for and from the business goes in. Be disciplined enough not to spend business money on personal expenses, and if you do it will be great to pay back with interest.
Learn the Basics of Financial Accounting
Thank God for the internet. There are tons of resources to learn financial accounting for your business. The survival of your business might well rest on knowing how to put down expenses made, and income earned. Knowledge of the basics of bookkeeping well help you have a thorough overview of how your business is doing.
Pay debts as at when due
It is good financial planning practice to pay business debts when they are due. Whether the loan is from a financial institution, friends and family or investors. Paying back business debts when due builds trust in the business and ensures that when next you need to raise money or attract investors, the track record of the business will speak for it in that regard.
Plan for risks
As a small business owner, your capacity for risk is considerably smaller than bigger corporations. And these bigger companies plan for risks, and there is no reason why you should not. Planning for risks enables you have a safety net in case things go awry in your industry, for instance a government regulation could stifle growth. Or if things go wrong in your locality, your shop might be marked for demolition because it is on government land or disputed land. When you plan for risks you will not be taken by surprise and stand a better chance of longevity and success by doing so. Planning for risks might be in the form of taking out insurance or putting money aside for emergencies.
Have a sharing formula.
As a business owner, no doubt you’re in business to make money for yourself and increase your spending power, and also the quality of your life. As your business makes profit and grows, these two indices are bound to increase as well. However, this should be done under principle. Your business will need more investment for growth to be sustained, and goals to be actualized. Investors or loans will need to be paid.
As mentioned above, risks have to be planned for. Also, you as the business owner need to be paid. For all these to happen seamlessly, have a sharing formula that works for your business and all concerned. This formula will determine how many percent gets plowed back into the business, how much the business owner is being paid and how much gets set aside for risks and debts.
As you go on in your business you will find out what works and what does not. No matter the nature of your business, whether you are a Mobile Money operator or a food vendor, the importance of financial planning in your operations cannot be underestimated. Be sure to learn as much as you can on financial planning to make sure your business remains in good financial health.