Financial Tips for Startup Businesses
Being an entrepreneur is a tough job—there are hundreds of urgent matters pulling you in different directions on a daily basis. However, no matter how busy you are, you should always keep a finger on your business’s financial pulse. And not just monitor your finances, but plan ahead, especially when you are just starting out. At The CFO Source, we’ve been providing Maryland business consultation and accounting services for over a decade, and are happy to share some of the financial tips we offer new business owners.
Determine Your Breakeven Point
Figure out what your breakeven sales figure is—the amount of money you need to generate in order to cover your initial business expenses. To calculate your breakeven point, you will need to know your fixed and variable costs:
- Fixed Costs: rent, equipment, salaries, depreciation, insurance, etc.
- Variable Costs: raw materials, utilities, maintenance, packaging and storage, etc.
We’ve put together these spreadsheets to help you keep track of initial and ongoing business operating expenses. Can you generate enough sales to cover costs and make a profit? Price your service or product to make a profit, not to break even. Don’t be afraid to make money—let your customers tell you if your price is too high.
Get an Accountant
Get an accountant to set up your books and do your taxes—ongoing bookkeeping can be a do-it-yourself process, but the initial setup is not. It’s worth having a professional help you choose the best accounting method for your business and make sure your books are started without errors.
An experienced Maryland accountant can also show you how to generate and read financial statements and know the difference between a balance sheet and an income statement. As a business owner, you will need to pull this data and review your financial statements regularly.
Have a Plan B
Of course, you want your business to succeed, but what if it doesn’t take off immediately like you planned? Make sure you have sufficient capital to weather a sustained period of losses. And think of an exit strategy in case it comes to shutting down your operations. For example, instead of getting a five-year lease, get a one-year (or shorter) lease with options to renew.
Outsource tasks that are outside of your area of expertise—no one can be an expert in everything. Whether it’s marketing, accounting or CFO roles, you will notice your business running smoother when you can focus on wearing the hats you actually enjoy wearing. Outsourcing will also save you money at the first stages when you might not have enough workload in certain areas to justify a full-time hire.
Determine Your Competitive Advantage
Determine what your competitive advantage is: low cost, sole provider, innovation, etc. You can do this by researching your competition and how they price their goods or services. Once you come up with your competitive advantage, you can formulate your unique selling proposition that will become the basis for your branding strategy.
- If you operate in multiple states, keep in mind that you’ll be subject to tax in each state you have a presence in.
- Contact state and local government business development offices for potential financing and guidance.
- Get the right insurance—use a commercial broker who specializes in your industry.
- Ask vendors and suppliers for discounts and delayed payment terms.
- Have adequate separation of duties for internal control.
- Reconcile your bank account monthly—check fraud is rampant.
Starting a business is not easy, but with the right guidance and advice you can set yourself up for many successful years. And if you have any financial questions or concerns, you can always rely on The CFO Source for professional advice.
Contact us today to get help with financial planning for your startup.