When it is time to take the plunge and begin the business of your dreams, it is crucial you have done your homework when it comes to your financials.
After all, at the core of every business is money! Regardless of whether you are wanting to change your lifestyle or change the world, it is impossible to do either if you end up bankrupt. Starting a business is a big financial commitment and responsibility.
Financially Empowered from my passion of creating financial empowerment for women through mentorship and educations. The best time to start feeling empowered about your financials is as early as possible in your entrepreneurial journey.
There are some key areas that you can narrow things down to:
Start-up Costs: Consider whether your individual business needs. This will be dependant on what products or services you provide as well as your target market and income goals. Some expenses you will want to consider may include:
- A physical space. Remember to factor in maintenance costs as well as regular utilities. Alternatively you may want to create a home office to help reduce your costs at the start.
- Equipment. It is worthwhile keeping a list of must haves as well a list of items you wish to purchase in the future.
- Technology. Consider whether you will need a new laptop, computer, printer etc. Also consider programs and extras such as anti-virus and backup
- Employee Expenses. If you are considering hiring staff make sure you have factored in all related expenses
Insurance: It may be tempting to leave this one for now but having business insurance will ensure you are covered from day 1. Think about these 3 key areas when it comes to insurance:
- your workers
- your business
As entrepreneur, you’re captain of the ship, and you will sink or float with it. Having insurance is the life jacket to your business.
Buffer: They say the early months of a new business are the most challenging. Having an income buffer with money set aside in case of an emergency can be invaluable. There are many emergencies that may creep up on you unexpectantly and without a buffer they could create a big issue. Entrepreneurship entails a plethora of posed risks. Have money saved and ready to protect you on the rainiest of days.
Replacement Income: Leaving your old, miserable job behind to start the business of your dreams can be exciting. It would be wise to have set aside some funds to support your basic needs in the early days so you can create the business of your dreams without having to compromise because of your income needs.
Remember that entrepreneurship always comes with some risks and bumps along the way. Make things easier for yourself by setting aside replacement income so you’ll still be able to eat and have a roof over your head in all circumstances.
ATO obligations: It can be tempting to just get started and worry about your ATO obligations sometime later but that can be dangerous. Read my case study here on what happened when Joan failed to meet her BAS obligations. All businesses have certain responsibilities, these include:
- Superannuation – not just for any employees but also your own. It would be terrible to work all your life and then at retirement realise you had nothing set aside for yourself. Catherine, Kalahari Business Advisors has some great advice on paying additional super and the implications here
- BAS/ GST – in the beginning it is unlikely you will have to complete a BAS however keep in mind once you are earning over $75,000 you will have to register for GST
- Employees – if you happen to have any employees it is important to meet your obligations when it comes to PAYG and other employee benefits. If you are in doubt about whether they are an employee or contractor you can read my blog here
Starting up the business of your dreams and becoming your own boss is an exciting time. If you prepare yourself financially it will contribute to your success and ensure your business does not become a financial headache.
For assistance with your individual financial needs and working out what your responsibilities and obligations are contact me for a free consultation.