So you have your business idea in place and you are ready to move to the next step. What many entrepreneurs and new business owners don’t think about is their personal financial situation. Personal finances can mean the difference between success and failure in business. Here are some tips to ensure you are adequately prepared to move on to your business.
1. Have cash available for professional services – Just like everything else in life, starting a business takes money. You’ll likely need professional assistance on your business plan and legal advice from a good business attorney. These services are generally needed prior to you receiving any funding, so therefore, they must come out of your pocket. If you can’t afford these services, start saving now and wait until you can before trying to go in to business.
2. Have money in the bank to live on – Many investors and bank officers don’t like to have business owners take money out of the business, including a standard salary, for the first several months of business operations. If you can avoid it, it’s best to have money in the bank and take no salary at first. Instead, by keeping the money in the business, you can provide yourself with the best opportunity to really make it big, for you and the investor.
3. Continue to work and bring in income until you can’t anymore – While we all want to quit our jobs right away when we have a good business idea and want to work on it full-time, this in many cases can be counter-productive. Until your business needs you full-time, don’t leave your current position. It’s better in the long-run to build up your personal financials. Instead, work on your business when you are not at your job and find professionals who can be more efficient on certain tasks, such as the business plan and addressing legal concerns.
4. Pay off your debts and work on your credit score – Just like all other loans, having lower debts and a good credit score are important. While this isn’t nearly as important to an investor, having less debt and lower payments will allow you to work more and take less from the business.
By following these simple tips, you can prepare yourself financially for jumping in to your new business.