Coming up with a great idea that can be turned into a prosperous business venture takes a certain talent. Knowing how to get your great idea financed and properly managed, takes another. However, it may be easier than you think.
What You Need, What You’ve Got, and Where to Get the Rest
If you think you’re in over your head when it comes to the financial aspects of your business, you’re probably not. Really. In fact, all you need to do is sit down with an experienced business lawyer and determine what money you need, what you’ve got, and where to get the rest. According to the U.S. Small Business Administration (SBA), the following are some of the financial areas in which to focus when financing your new business:
- Estimating Startup Costs. While the most important startup cost will likely be “seed” money (the funds necessary to bring your idea to life), others include:
- ongoing costs – such as insurance, inventory, and utilities;
- one-time costs – such as incorporation fees;
- essential costs – such as fixed expenses (rent, utilities, administrative, etc.) and variable expenses (inventory, shipping, packaging, commissions, etc.); and
- optional costs – such as advertising, signage, or grand opening activities.
- Using Personal Finances. While many people finance some percentage of their venture using their personal finances, it’s important to avoid putting yourself in financial danger. Take a good look at your personal income, expenses, credit score, and adversity to risk.
- Financial Analysis and Statements. Developing a cash flow analysis (which determines the amount of cash you need to start, operate, and expand your business) and breakeven analysis (which determines when your business will break even and begin to make a profit) are important steps in the financial part of the process.
An equally important part of the process is having financial statements prepared, which are needed when seeking funding from investors or financiers, for ongoing management of the business, and for tax purposes. If you’re not an accountant, hiring an experienced professional to assist you with this step is probably a necessary evil. A good accountant or business lawyer can help ensure that you are starting your business off on the right financial foot.
- Borrowing Money for Your Business. Once you know what you’ll need to borrow, you can narrow your search to find the best lender based on your individual and business needs. The SBA offers financial assistance, as do banks, venture capitalists, and many others. Although there are a plethora of options available, never assume you’ve identified all potential sources of funding until you’ve consulted with an experienced professional.
Starting a business can be a complex process – especially when it comes to finances. Give us a call today. We can share our experience with you to unravel the mysteries of financial statements and help get you going in the right direction to build a financially healthy business.