When you’re running a small business, finances are very important. In fact, if you figure out your finances beforehand, then you’re likely to make your business a success and vice versa.
But if this is the first time you’re starting a small business, then you may not know exactly how to figure out your finances. This is not because financial matters are so complicated or difficult to figure out. It’s just because you don’t have the experience necessary to know what expenses you’re going to have.
Any New Project Has Unexpected Expenses
Starting a business is really just like any other big life project, such as buying a house, going to college or getting married. If you’ve ever done either of these things, then you know that you’re likely to run into expenses you hadn’t anticipated.
For example, when you buy a house, you don’t just have to make a down payment and pay your mortgage. You also have to pay taxes every month and pay your agent a commission. Plus, there are always so many odds and ends you might have to buy for a new house. Similarly, when you go to college, you have to budget for the tuition, living expenses, books, a computer etc.
Financial Planning to Foresee Future Expenses
Whenever you do anything which represent a big change in your life, you know that there might be expenses you hadn’t thought of. The same is true of a small business.
You can try and remove the element of surprise by speaking to your accountant and coming up with a financial plan. The plan should take your overheads into account, such as rent, salaries, raw materials etc. It should also consider utility bills, consultants’ fees, production costs, storage costs (if you need a warehouse to store your products) etc.
Be sure to do some research about how much these things cost nowadays; don’t just assume that you’ll get them at the rate that you may have heard of before.
Projection Figures for the Upcoming Year
It’s a good idea to think ahead and figure out exactly when you will be able to start selling your product. Get some projection figures which will tell you how much you can expect to make in the first few months or the first year.
Careful Planning to Diminish the Effects of Chance
The truth is that there’s always an element of chance involved in starting a new business, especially if your product or service is one that’s new to the market. But with careful planning, you can reduce this element of chance or luck so that it doesn’t get in the way of your company’s success. Contact us to learn more about the process of starting a new business.