Failure is overrated.
All those fun little motivational memes you see people posting on Facebook really don’t help much when your small business is waiting to take off and your bank accounts dry up. But keep your head up: Despite the popularly-held claim that half of all small businesses fail in the first year, the U.S. Department of Labor says that 75% of small businesses make it through their first year, and 69% make it two.
Sure, that information might be comforting, but it still isn’t putting any money in your pockets. So what can you do while you wait for the imminent success of your business? Well, here are 8 ways to manage your money when you start a small business.
Set a Budget to Startup Your Business
If you referred to the money you’d set aside to live off while your business got off the ground as your “rainy day fund”, you may notice it’s rained a little more this year than you had anticipated. It’s ok to burn through some of your savings when you’re starting out, but you need to determine beforehand how much is acceptable and not go past that. Otherwise, should the business not work out, you’re in even more trouble than you are now.
Don’t Quit Your Job
Avoid quitting your “day job” if you can. Obviously, running a small business might be a full-time job in and of itself, and keeping your current job will not facilitate that. And yes, still working and setting up your business may stretch you thin. But nobody said running a business was going to be easy, and this will really test out if business ownership is for you.
Find Creative Sources of Income
Do you have a room in your house that you can rent out? Are you willing to drive for Uber on the side? Can you sell lemonade on your front lawn for a nickel? That last one may not prove worth your time, but still finding a side hustle or an extra source of income, while stressful, might make all the difference. When starting a small business, you’re going to need all the flexibility you can get and an additional income stream can give you the flexibility you need.
Trim Your Expenses
Trimming your expenses means more than just skipping dessert and the second glass of wine when you go out for dinner. It means eating tuna and ramen noodles for months if you have to. You might think you’re too old for it now that you’re out of college, but this isn’t a time for pride. Do you REALLY need HBO? Can you live with a smaller car? Anything that’s not a necessity may have to go for the greater good of your startup. Even if you think you can’t live without it, you probably can. Arya Stark will be there when you get back. Or maybe she won’t.
Get a Part-Time Job
This doesn’t take a lot of creativity, just more time out of your day. But waiting tables or bartending can be especially lucrative in tight times. Or if you have a skill that you can leverage to get freelance work, like writing or book keeping or even auto repair, keep yourself abreast of opportunities that are out there. Places liked LinkedIn and industry-specific message boards are a good place to start looking for a part-time job.
Control Your Business Expenses
Just because something is a tax write off doesn’t mean it’s free, you know that, right? Some new business owners think business expenses are magical costs that don’t “count” towards their budget, but it’s still money that you are spending. So hold off on those extravagant client lunches and conferences in Florida until you can pay for them in cash.
Keep Personal and Business Accounts Separate
Hopefully, an accountant, attorney, or other business owner told you this when you started out. But not only does this protect you personally in the case of a lawsuit or, heaven forbid, bankruptcy, it also helps you stay afloat personally when your business accounts are drying up. It’s also important to consider forming a Limited Liability Company (LLC) or a sole proprietorship for your business to further protect your personal assets.
Get a Loan for Your Business
If you do get a loan, make sure it’s not from your family. Because then they’ll remind you about it at every holiday, birthday, Bar Mitzvah and Quince, which is exactly what you want to be doing when you’re trying to celebrate.
Once you’re up and running for more than 9 months, you can look into other business financing options from business lenders like Business Financial Services. BFS can help you get necessary cash when you need it, at a reasonable rate that you can pay back as you grow your business.