Just because you are operating a small business does not mean you are not accomplishing big things. It would also stand to reason that accomplishing big things may require an even bigger budget. Walking the financial tightrope when you are a company of smaller stature tends to get a little tricky when “growth” is the main part of the business plan. Knowing how and when to spend money is the key component to keeping your business engine revving and geared up for a successful journey.
Avoid Comingling Cash
You will save yourself plenty of unwanted grief by keeping your business and personal finances completely separate. Blending the two together could cause serious tax liability and major accounting issues that could potentially send an otherwise solid small business into a downward spiral of considerable financial ruin. Avoid the temptation of borrowing money from one source to pay the other source’s expenses. For example, avoid using business funds to cover car payments or your home’s mortgage. The more cash you saved before opening your business, the better. In fact, having at least six months or more of both business and household expenses saved is ideal. This will provide a good enough safety net for the times when you need to pull funds from those reserves. Also, strive to make your personal budget as important as the one for your business. By doing this, you will offset the temptation to combine those finances.
Know Basic Math
Mathematics may have not been your strongest subject in grade school, but once you became a small business owner, you also unknowingly decided to ramp up those numerical skills. Acquiring basic accounting knowledge is a prerequisite for exceptional money management. In fact, understanding the financial aspect of your business is equally as important as the products and/or services you are providing. Even if you have hired highly qualified professionals to handle the financials, it behooves you to participate in the bookkeeping and financial functions of a business you started and obviously want to see flourish over time.
It is not uncommon for many entrepreneurs to have dreams of growing their businesses into ventures of gargantuan proportions. However, the reality of growth and expansion is a bit more on a smaller scale. Truth be told, expanding too fast can reap negative consequences that could be difficult to reverse overnight. Once your business becomes profitable, it may appear that the next logical step is aggressive expansion. The downside is that expansion costs money, time, and effort that you may not be adequately prepared to undertake. If you are already burning the candle at both ends, expand with caution by taking your time.