Managing Expenses as a New Business Owner
“Half of all businesses fail.” That’s the hyped-up (and disproven) statistic that is constantly tossed about by the media. The real data shows us, however, that the majority of new businesses (roughly 80 percent) do, in fact, survive their first year of business. Meanwhile, with so many technological advances and tools at our fingertips, there’s never been a better time to start your own business. Of course, being an entrepreneur means managing your business’s money. Here’s some advice for new business owners on how to be smarter about business expenses.
As tempting as it can be to rent the office of your dreams and invest in big purchases to flaunt the fact that you’re a “successful” entrepreneur, financial analysts recommend making a smaller statement. Instead, take some advice from Eric Ries’s book, The Lean Startup, and don’t invest in unnecessary overhead costs. As Ries puts it, the lean startup methodology is about more than just saving money; it’s an entire process for launching and running a successful, efficient business.
Obtaining funding for your new business can be a huge benefit, especially for those who are just starting out. Whether it's a line of credit, a business credit card, or taking out a loan, having the extra capital can help you hit the ground running. The benefits of funding your new business include providing capital or cash to pay employees (yourself included), purchase new inventory, and pay for marketing costs or any number of other things your business needs in order to keep moving forward. Of course, this is not meant to be a long-term solution. Instead, it’s intended to provide funding in the short-term while you get off the ground with the full intention of repaying any money that is borrowed. Keeping that in mind, it can be a good way to even out your business’s cash flow.
Prioritizing Your To-Do List
Part of making wise spending decisions as a business owner involves understanding your business’s must-haves and nice-to-haves. What are the necessities that you really need in order to operate? When you’re getting off the ground, you’ll need to be mindful of your bottom line. This involves focusing on tasks that are absolutely essential priorities, such as paying rent for any office space and paying your utility bills to keep the lights on. Having gallons of water automatically shipped to your business each month? That’s probably a low-priority expense you can cut!
Managing Your Taxes
One of the trickiest parts about running a new business is figuring out all the tax responsibilities. It is especially confusing if you’re going from working for a corporation that filed taxes for you to having to file your own taxes and report income each quarter. Luckily, you don’t have to go it alone. Hiring an accountant can be a huge help for new business owners. Even if you can’t afford to hire an accountant right away, accounting software is fairly affordable these days -- and there’s even free software available. Just do some research and ensure you’re investing in a high-quality product.