Here’s a gist of what you need to know
Are you looking at starting your own business? As promising as it sounds, there are several factors you need to consider before you take any big steps. The key to running a long lasting and profitable business is to be flexible with planning and assertive with your thinking.
While setting up a business, one needs to keep a check on several financial and motivational aspects. Being an entrepreneur is easy, but being successful involves a lot of work. Fundamentally, a business plan should resonate with your interest and time capacity. It pays off to do extensive market research to understand where you want to be in the next 3-4 years. After which, you should take a look at your finances.
A few financial considerations:
- Forecast of estimated start-up expenses and revenue for the first few months. This crucial step helps you understand how much money you would need to borrow. Start-up expenses relate to
- IT costs- computers, internet, software, phones, etc.
- Cost of Sales- logistics, raw materials, postage etc.
- Marketing- website development, online marketing, graphics, signs etc.
- Staff- wages, insurance, superannuation etc
- Professional fees- tax agents, architects, accountants, lawyers etc.
- Administrative costs- licenses and permits, office stationery, utility bills, etc.
- Establish figures to help you understand the point of break even. This involves identifying minimum number of sales required to sustain the business through the rough patches. By developing a realistic idea about how well you might do, you’d be taking the pressure off your shoulders when things are just slowly picking up.
- If you plan to transition from your day job to running your own business, don’t rush to quit the job till you achieve a moderate cash flow.
- Gain a deeper understanding of all your operating costs. It is very likely for business owners to run out of funds months before the stipulated date. In these kind of situations, banks are not in a position to fund you any further. Therefore, when you know all the costs involved in running your business, and you have established a break-even point, you can continue to run the business without any rude surprises.