Unveiling the Basics of Purchase Order Financing
Purchase order financing offers a funding solution for businesses to cover the costs of materials or products required to... Read More
It’s difficult enough to keep track of your personal expenses, and when you mix your business income with the money in your checking account, things can quickly get out of hand.
For this reason, we recommend you open a business account before opening your business to start with a clean slate. Then, apply for your Employee Identification Number (EIN), a.k.a., your business tax ID or ITIN. If you forget while operating as a corporation or partnership, you can get into a lot of trouble with the government.
The second steps of your financial plan is identifying your funding sources. You’re going to need money to finance your startup, but what’s the best way to find it? There are actually multiple ways to finance your small business, and it depends on your personal style and how much money you’re currently worth. Here are a few popular ways entrepreneurs fund their startups:
The above are just four ways to finance your business in its early stages.
What is the real cost of starting or operating a business? Total expenses can be easily underestimated at the beginning of a business, so make sure to itemize every single thing you might need to invest in when you first start out – after all, this can be revised later as your business finds its footing. Here are just a few of the expenses you’ll want to consider for your startup:
Once you have the numbers, add these to your assets and recurring costs that keep your business going, and you will have your startup cost. You can also check out the Wall Street Journal calculator that help get you on the right track.
Figure out how much you'd like to make in profits. Once you decide how much you'd like to make in profits, you'll have to create a price point for your product that covers the expenses incurred in making the product and gives you the profit margin you're looking for. Not sure how to price your products or services? Follow these simple tips. And don't forget to add taxes to the equation for an accurate number.
Building a budget is the most essential step in creating your financial plan. Take a look at the expenses such as product equipment, utilities and other services you pay for in order to maintain the business. Insurance and rent are major expenses for many businesses as well. Keep the budget in an Excel or Google spreadsheet, and factor in other items such as savings and an emergency fund. As a business owner, you really don't know what to expect: in the beginning stages, you may spend more money than you might have anticipated. For this reason, it's really good to have a financial cushion to make sure that the business is covered.
Advertising and promotion are essential for growing your company. Because of this, it's so crucial for a small business to allocated a budget to cover marketing expenses. Most small business owners underestimate the power of a marketing budget to run the right ads and get in front of the right people. Thankfully, sites like Facebook and Instagram have excellent advertising programs that aren't nearly as expensive as creating a TV commercial. They work in the favor of the startup companies. However, it's still important to know that you'll get much farther as a company if there is a specified monetary amount to cover effective advertising and marketing campaigns. In the end, you have to plan for where you want to go. It's important to factor in sustainability and growth for the company. Once you do this, you'll have an easier time focusing on outsourcing, product creation, and customer engagement. Before you know it, your small business will be making big financial moves.
Alex Briggs is a contributing author for Wages & Benham.
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