Whether you’ve always dreamed of being your own boss, or you’ve found a gap in the market which you’re just itching to fill, starting your own business can be really exciting time. It can also be incredibly daunting.
As for the title, it might sound as if we’re exaggerating a bit. But the truth of it is 20 percent of all start-ups fail within their first 12 months, and many more don’t make it through the early years. Sometimes the product is wrong, the marketing or sales are weak, or the business plan is unstable. In other instances the business fails simply because it has run out of money.
As soon as you grow enough to begin hiring staff, the responsibilities seem endless. Wages, health and safety considerations, pension schemes and national insurance contributions all suddenly become your responsibility.
Money is especially tight when you’re running a fledgling business. As such, it is especially important to manage finances carefully. Hiring a reliable accountant and implementing Sage accounting software can help keep everything in check, making sure that your finances are well organised and that everything stays within budget.
Don’t Wait Till Money Gets Tight
Splashing the cash might seem tempting when you’ve just signed your first big contract, or made a sale. Better practise is to use these are the times to look for investment. It might seem counter intuitive to finance a company which is doing well, and in doing so dilute the ownership.
If you try and finance a company which has no money you’ll find it much harder. The reason for this is twofold. Firstly, seeking an investor when you are desperate for finance feels like a race against time. You’re putting both yourself and the company under unnecessary pressure. The other reason is the investors won’t want to put their money into a company which appears to manage finance poorly.
You cannot predict when things will go wrong and when you might have unexpected expenses. The best way to prepare for these eventualities is to have an excess of finances available. Consider it like a savings account – it’s there when you need it, and you shouldn’t just fritter it away.
If you raise too much finance and have a lot of investors you will have plenty of capital month on month but might not make quite as much should you decide to sell the business, but if you don’t raise enough, the whole company could fold, losing any investment along with it.
When it comes to business success, you have the chance to make more money if you take more risk, but in doing so you also stand to lose more. Instead, scale slowly and when demand requires rather than quickly in anticipation of demand which may never materialise.
Similarly, if you take on a lot of stock early, it doesn’t mean you’ll sell it all; it means is you have a lot of stock. Sage accounting software can be used for stock management which will determine how much you should order. Don’t guess.
Taking on staff can be expensive, but it’s also key for growth. Sage accounting software will help you monitor cash flow, which will show you whether or not you’re company is in a position to afford new staff (or new anything).
Spending money on offices and staff when the business plan isn’t finalised will be a poor use of time and resources. Instead, grow the plan and funds until you have enough capital to expand. Technology can make your job more simple so can be appealing, but Sage accounting software and the services of an accountant are more than just a useful extra – they’re a must have for the financial health of your business.