As a new business owner, it can be tricky to know where to start with managing your finances. How much do you invest in your business? How to set up payment terms? We have enlisted financial adviser Victoria Devine, owner of Zella & She’s On The Money (SOTM) to help! Here are her top three strategies and what they could look like in your business.
1. Know how much your business will cost you before you commit
2. Have a little capital to back you up before you start
3. Establish definite payment terms with your clients
It’s important that you start off on the right foot financially, so everything is in place for when it comes time to scale! There are many things happening when you first start a business; you’re finessing your service, working on your marketing and establishing your reputation in the industry, so if you already have your money strategies set, it really is just one less thing for you to think about. Employing great money practices and habits early on will help you immensely when your business grows, so take the time now to put in a little extra work, understand your strategies and how to implement them, and then get started!
Know how much your business will cost you before you commit
There are no costs involved when it comes to researching and developing your business. Let’s take the example of starting your own candle business. What can you do before laying out any money?
- Ask yourself what you’ll call your business and confirm that name is available
- How much will it cost to get a domain name and website set up?
- Assess how much it will cost to register a business as a sole trader or a company?
- What are suppliers charging for different products? If you’re starting a candle business, how much will the glass jars cost you? Is soy wax cheaper or beeswax?
- Are you great at branding and marketing? Or will you need to pay someone else to help you out in that space?
- Will you use a clever payment service like Square and what will that cost you?
Remember Google is your best friend. Here are some handy websites to get started,
Have a little capital to back you up before you start
Before you launch into your new venture, it’s crucial to have finance behind you to lean on so you can have the freedom of knowing that if something goes wrong you’re covered. For example, if you have a thriving hair salon, but unexpectedly the salon across the road is giving away free trims for the month of May (rude!), then you may lose some of your forecasted income as your regular clients are lured by the appeal of a free haircut. By having a little capital behind you, it means you can still cover your expenses (like rent and staff wages) during this unexpected down period, and replenish it when business is booming again and the neighbouring salon returns to regular operations.
Establish definite payment terms with your clients
Establish clear and non-negotiable payment terms with your clients so you can ensure that your cash flow is operating as it should and cover any unexpected costs that may crop up. Imagine you’re a plumber who provides an array of services to various clients, some large and some small. If you don’t outline the payment expectation in your initial discussions and specify it again on your invoice, clients may take you for a ride and hold off on their payment for as long as they like. This can have the flow effect of impacting your cash flow, which can jeopardise your ability to pay suppliers, staff, etc.
If you feel odd about setting out the terms, compare yourself to a restaurant; when you go out for a meal, you pay on the spot for the product you’ve enjoyed and the service you’ve had. The restaurant can pay staff, rent and suppliers without issue. We don’t bat an eyelid there, so you shouldn’t feel weird about outlining your payment terms, which gives clients ample time to pay you for your hard work!
This article is only for educational purposes and does not constitute legal, financial or tax advice. Make sure you consult a professional regarding your unique business needs.