Starting a business may sound like the opposite of a walk in the park. It includes sound planning, capital, and risks. There are also many uncertainties when it comes to joining the competitive market with both big- and small-time businesses. When looking at the competitive nature of businesses from the outside, it may seem like jumping into the unknown.
The incorporation of monetary assets makes starting a business even more of a far-fetched idea to some. However, some people brave the tide. Some succeeded, and some did not. According to an article published by The Washington Post, only half of new businesses survive for five years. Some go out of business before even reaching the five-year mark.
Why is such the case for new businesses?
Businesses new and old rely on sound business plans, budgeting, target consumer base, marketing, and selling. For small businesses, it is easy to overlook these factors during operation. It may even be ignored at times, which can result in them spiraling downwards.
The case for new businesses can also be attributed to the competitive nature of businesses. Joining an already competitive market with something foreign to consumers can either make or break the business. With millennials, however, new businesses can benefit from being unique and authentic. Millennial consumers gravitate towards businesses that are genuine and completely aware of what impact they want to make. Such is also the case for the previous generation of consumers.
How can new businesses run on sound financial planning?
After the thorough research before solidifying a business idea, potential owners should start planning their future venture’s financial affairs. A comprehensive financial plan can keep a business operating in the sea of big and small businesses and during times of uncertainties such as the one brought about by the coronavirus pandemic at the beginning of the year.
Here are a few suggestions for future business owners’ financial blueprint:
1. Map the necessary expenses
Getting a grip on the business’s needs, such as storage, store, supplies, marketing, and employee salary, should come after a business plan is finalized. Mapping the necessary expenses will give the owners an idea of how much the venture will cost them—it can give them the chance to make some changes to decrease or increase upcoming expenditures.
Without mapping the necessities, it is possible to overspend on other business needs that can be acquired after the necessary ones. If a business does not have enough money to cover the acquisition of enough supplies, product marketing, and employee compensation, how can it run smoothly? The best way to handle this is to get in touch with an experienced financial advisor.
2. Figure out taxes
Businesses cannot operate without paying appropriate taxes. It can become a legal implication for them if they overlook their dues to the state. Businesses new and old, under the sole ownership or not, are required to pay taxes. All income gained from business transactions is taxable.
Gaining knowledge on what dues a new business must pay is a step forward to sound financial planning. Without awareness, owners can use up all income to stock replenishment, employee salaries, and other business aspects.
3. Make business accounting automated
Businesses, without regard to size, require an accounting. Owners need to be aware of where monetary asses come from and go to. Without this, it will be hard to know what is giving them the most income and taking most of it.
Today, there are many accounting software available for businesses to digitalize and automate their accounting. This is especially convenient nowadays because the records cannot be damaged by fire, floods, or other natural calamities. The accounting documents can easily be stored and accessed because they are digital.
There are more things to be considered when creating a comprehensive financial plan for a business. Owners should also review their personal finances to determine if they can take a financial hit in case a business fails. However, it is also important to separate personal and business accounts. Doing so will help owners avoid spending business income on personal expenses and vice versa.
Is good financial planning the key to success?
Good financial planning is one of the keys. Yet a solid financial plan without execution cannot flourish in any way. A well-funded business can fail at any time without the right business model, marketing, and consumer base.
One cannot solely depend on a business being financially sound for it to succeed. Owners should also take into consideration how they will manage other aspects of their business for its success.