When​ starting​ ​a​ ​small​ ​business,​ ​one​ ​of​ ​your​ ​primary​ ​concerns​ ​is​ ​money:​ ​how​ ​much​ ​you​ ​are bringing​ ​in,​ ​how​ ​much​ ​you​ ​are​ ​spending,​ ​what​you are spending it​on,​ ​how​ ​are​ ​your​ ​revenue growing,​ ​how​profits can be​increased,​ ​so​ ​on​ ​and​ ​so​ ​forth.​ ​Your​ ​financial​ ​stability​ ​and​ ​cash​ ​flow are​ ​the​ ​lifeblood​ ​of​ ​your​ ​growing​ ​organization​ ​and​ ​knowing​ ​how​ ​to​ ​manage​ ​it​ ​well​ ​can​ ​mean​ ​the difference​ ​between​ ​consistent​ ​and​ ​long-term​ ​growth​ ​and​ ​stalling​ ​out​ ​after​ ​a​ ​few​ ​short​ ​months or​ ​years.

Perhaps​ ​the​ ​hardest​ ​financial​ ​practice​ ​for​ ​small​ ​business​ ​startups​ ​is​ ​swallowing​ ​the​ ​fact​ ​that​ ​it’s going​ ​to​ ​take​ ​a​ ​lot​ ​to​ ​try​ ​and​ ​compete​ ​against​ ​larger​ ​companies.​ ​Everything​ ​about​ ​your​ ​firm from​ ​your​ ​model​ ​to​ ​your​ ​products​ ​may​ ​be​ ​better​ ​than​ ​those​ ​major​ ​corporations,​ ​but​ ​simple cash​ ​flow​ ​puts​ ​you​ ​miles​ ​away​ ​from​ ​them.​ ​To​ ​help​ ​shorten​ ​this​ ​gap​ ​and​ ​get​ ​your​ ​business​ ​on​ ​the right​ ​trajectory​ ​for​ ​success,​ ​here​ ​are​ ​7​ ​of​ ​the​ ​best​ ​financial practices​ ​for​ ​startup​ ​companies​ ​to save,​ ​profit​ ​and​ ​grow.

7 Best Financial Practices For Small Business Startups

7 Best Financial Practices For Small Business Startups

Best Financial Practices Adopt By Small Business Owners (Image from Pexels)

1. Plan,​ ​Plan,​ ​Plan 

The​ ​idea​ ​of​ ​planning​ ​seems​ ​obvious,​ ​but​ ​you’d​ ​be​ ​surprised​ ​how​ ​many​ ​business​ ​owners​ ​come running​ ​out​ ​of​ ​the​ ​gate,​ ​excited​ ​for​ ​their​ ​new​ ​company,​ ​and​ ​quickly​ ​realize​ ​they​ ​went​ ​too​ ​far, too​ ​quick​ ​or​ ​in​ ​the​ ​wrong​ ​direction.​

​Calculate​ ​every​ ​step​ ​you​ ​take,​ ​not​ ​only​ ​from​ ​a​ ​financial​ ​and budgeting​ ​standpoint​ ​but​ ​also​ ​from​ ​a​ ​goal-oriented​ ​one.​ ​Having​ ​clear​ ​objectives​ ​each​ ​week, month​ ​and​ ​even​ ​year​ ​will​ ​keep​ ​you​ ​focused​ ​and​ ​prevent​ ​you​ ​from​ ​spending​ ​on​ ​activities​ ​that don’t​ ​pertain​ ​to​ ​these​ ​aims.​ ​You’ll​ ​spend​ ​less​ ​and​ ​spend​ ​smarter.

2. Don’t​ ​Expand​ ​Beyond​ ​Your​ ​Means 

You​ ​want​ ​your​ ​business​ ​to​ ​grow,​ ​and​ ​you​ ​want​ ​it​ ​to​ ​do​ ​so​ ​quickly;​ ​every​ ​business​ ​owner​ ​does.

From​ ​a​ ​small​ ​business​ ​perspective,​ ​it​ ​is​ ​especially​ ​alluring​ ​to​ ​expand​ ​quickly​ ​and​ ​make​ ​a​ ​serious push​ ​towards​ ​competing​ ​with​ ​the​ ​‘big​ ​guys.’​ ​But,​ ​a​ ​lot​ ​of​ ​startups​ ​that​ ​develop​ ​too​ ​rapidly​ ​find themselves​ ​over​ ​their​ ​heads.​ ​They​ ​don’t​ ​always​ ​account​ ​for​ ​the​ ​infrastructure​ ​and​ ​resources (not​ ​only​ ​money​ ​but​ ​also​ ​staffing,​ ​technology,​ ​time​ ​and​ ​other​ ​tools)​ ​that​ ​are​ ​required​ ​to​ ​handle such​ ​growth.​ ​Thus,​ ​they​ ​can’t​ ​adequately​ ​sustain​ ​or​ ​manage​ ​such​ ​an​ ​expansion​ ​and​ ​often​ ​need to​ ​scale​ ​back​ ​or​ ​scramble​ ​to​ ​put​ ​together​ ​the​ ​necessary​ ​resources​ ​to​ ​handle​ ​it.​ ​In​ ​either​ ​case,​ ​it is​ ​going​ ​to​ ​hurt​ ​your​ ​business​ ​financially.

3. Know​ ​When​ ​to​ ​Ask​ ​for​ ​Help 

Help​ ​comes​ ​in​ ​a​ ​lot​ ​of​ ​different​ ​forms.​ ​For​ ​some​ ​people,​ ​it’s​ ​easy​ ​to​ ​ask​ ​for,​ ​but​ ​a​ ​lot​ ​of​ ​times and​ ​for​ ​a​ ​lot​ ​of​ ​independent​ ​people,​ ​it​ ​is​ ​one​ ​of​ ​the​ ​hardest​ ​things​ ​to​ ​do.​ ​Asking​ ​a​ ​friend​ ​or family​ ​member​ ​to​ ​borrow​ ​some​ ​money​ ​during​ ​a​ ​particularly​ ​rough​ ​period​ ​or​ ​seeking​ ​out​ ​a​ cash advance​ ​or​ ​small​ ​business​ ​loan​ ​through​ ​a​ ​lender​ ​is​ ​certainly​ ​elicits​ ​some​ ​uncomfortable​ ​feelings.

But​ ​keep​ ​in​ ​mind,​ ​when​ ​you​ ​ask​ ​for​ ​help​ ​too​ ​late,​ ​it​ ​is​ ​damaging​ ​to​ ​your​ ​business,​ ​but​ ​also​ ​puts pressure​ ​on​ ​whomever​ ​in​ ​your​ ​family​ ​or​ ​circle​ ​of​ ​friends​ ​you’ve​ ​asked​ ​to​ ​borrow​ ​from​ ​to​ ​make​ ​a decision​ ​quick.​ ​If​ ​you​ ​decide​ ​to​ ​take​ ​advantage​ ​of​ ​a​ ​cash​ ​advance​ ​or​ ​small​ ​business​ ​loan,​ ​the longer​ ​you​ ​wait,​ ​the​ ​less​ ​time​ ​you​ ​have​ ​to​ ​shop​ ​around​ ​for​ ​the​ ​best​ ​option.​ ​Thus,​ ​you​ ​could​ ​rush your​ ​choice​ ​and​ ​end​ ​up​ ​with​ ​a​ ​less-than-great​ ​lending​ ​program​ ​or​ ​even​ ​struggle​ ​to​ ​​get​ ​approved for​ ​a​ ​loan​ ​in​ ​time​ ​to​ ​make​ ​a​ ​difference.

4. Ask​ ​For​ ​Discounts 

This​ ​practice​ ​is​ ​very​ ​similar​ ​to​ ​the​ ​above,​ ​but,​ ​instead​ ​of​ ​calling​ ​for​ ​a​ ​lot​ ​of​ ​immediate​ ​help,​ ​this strategy​ ​involves​ ​consistently​ ​asking​ ​for​ ​a​ ​little​ ​bit​ ​of​ ​aid.​ ​People​ ​like​ ​to​ ​see​ ​small​ ​businesses succeed,​ ​even​ ​when​ ​they​ ​aren’t​ ​their​ ​own.​ ​No​ ​matter​ ​what​ ​the​ ​focus​ ​of​ ​your​ ​business​ ​is,​ ​you have​ ​costs​ ​and​ ​these​ ​costs​ ​come​ ​from​ ​a​ ​variety​ ​of​ ​sources:​ ​suppliers,​ ​vendors,​ ​distributors,​ ​etc.

While​ ​these​ ​expenses​ ​may​ ​seem​ ​fixed,​ ​renegotiating​ ​them​ ​is​ ​always​ ​an​ ​option.​ ​By​ ​talking​ ​with your​ ​cost-related​ ​associates​ ​or​ ​partners,​ ​you​ ​may​ ​be​ ​able​ ​to​ ​talk​ ​them​ ​into​ ​a​ ​unique​ ​pricing option​ ​that​ ​better​ ​suits​ ​your​ ​small​ ​business​ ​needs​ ​and​ ​budget.​ ​It​ ​isn’t​ ​always​ ​going​ ​to​ ​work,​ ​but when​ ​it​ ​comes​ ​to​ ​a​ ​startup​ ​company​ ​that​ ​is​ ​trying​ ​to​ ​minimize​ ​costs​ ​and​ ​maximize​ ​profits,​ ​a little​ ​bit​ ​can​ ​go​ ​a​ ​long​ ​way.

5. Don’t​ ​Quit​ ​Your​ ​Job,​ ​Not​ ​Yet 

One​ ​of​ ​the​ ​biggest​ ​financial​ ​missteps​ ​that​ ​a​ ​new​ ​small​ ​business​ ​owner​ ​makes​ ​is​ ​going​ ​”all​ ​in”​ ​too soon​ ​and​ ​leaving​ ​their​ ​current​ ​job.​ ​Again,​ ​it​ ​is​ ​common​ ​for​ ​a​ ​startup​ ​owner​ ​to​ ​want​ ​to​ ​devote​ ​all of​ ​their​ ​time,​ ​money​ ​and​ ​resources​ ​into​ ​their​ ​company​ ​right​ ​away.​ ​This​ ​often​ ​means​ ​quitting their​ ​job​ ​to​ ​free​ ​up​ ​a​ ​lot​ ​of​ ​their​ ​time.​ ​But,​ ​putting​ ​all​ ​your​ ​time​ ​and​ ​energy​ ​into​ ​your​ ​startup isn’t​ ​always​ ​the​ ​smart​ ​bet.​ ​

Working​ ​80-hours​ ​a​ ​week​ ​for​ ​your​ ​own​ ​business​ ​may​ ​seem​ ​like​ ​you are​ ​living​ ​your​ ​dream,​ ​but​ ​it​ ​skews​ ​your​ ​profit​ ​margins​ ​and​ ​simply​ ​isn’t​ ​sustainable.​ ​Just​ ​because you​ ​are​ ​benefiting​ ​from​ ​80-hour​ ​weeks,​ ​doesn’t​ ​mean​ ​your​ ​earnings​ ​will​ ​continue​ ​when​ ​you begin​ ​to​ ​burn​ ​out​ ​and​ ​have​ ​to​ ​scale​ ​your​ ​workload​ ​back.​ ​Balancing​ ​your​ ​small​ ​business​ ​with​ ​an existing​ ​job​ ​can​ ​help​ ​ensure​ ​you​ ​don’t​ ​exert​ ​too​ ​much​ ​into​ ​your​ ​new​ ​venture.​ ​Plus,​ ​it​ ​is​ ​a​ ​good way​ ​to​ ​help​ ​fund​ ​your​ ​startup.

6. Recognize​ ​and​ ​Plan​ ​for​ ​Seasonal​ ​Cash​ ​Flows 

Any​ ​business​ ​owner​ ​knows​ ​that​ ​profits​ ​aren’t​ ​stagnant;​ ​sometimes​ ​they​ ​are​ ​down,​ ​and​ ​other times​ ​they​ ​are​ ​up.​ ​Being​ ​able​ ​to​ ​anticipate​ ​these​ ​peaks​ ​and​ ​valleys​ ​allows​ ​you​ ​to​ ​plan​ ​and budget​ ​better.​ ​For​ ​example,​ ​if​ ​you​ ​know​ ​business​ ​(and​ ​thereby​ ​profits)​ ​slow​ ​between​ ​the months​ ​of​ ​March​ ​and​ ​May,​ ​then​ ​you​ ​can​ ​prepare​ ​for​ ​this​ ​downturn​ ​and​ ​ensure​ ​you​ ​have​ ​the financial​ ​stability​ ​to​ ​outlast​ ​the​ ​slow​ ​periods.​

​Handling​ ​downtime​ ​and​ ​the​ ​slow​ ​times​ ​is​ ​more difficult​ ​for​ ​a​ ​startup​ ​company​ ​than​ ​it​ ​is​ ​for​ ​an​ ​established​ ​business.​ ​There​ ​isn’t​ ​prior​ ​history​ ​for you​ ​to​ ​look​ ​at​ ​and​ ​determine​ ​when​ ​these​ ​slow​ ​or​ ​busy​ ​times​ ​will​ ​be;​ ​therefore,​ ​you​ ​need​ ​to make​ ​sure​ ​you​ ​chart​ ​your​ ​activity​ ​from​ ​the​ ​beginning​ ​so​ ​that​ ​you​ ​have​ ​the​ ​necessary​ ​tools​ ​to plan​ ​in​ ​the​ ​future.

7. Watch​ ​Your​ ​Burn​ ​Rate 

The​ ​idea​ ​of​ ​burn​ ​rate​ ​goes​ ​back​ ​to​ ​the​ ​idea​ ​of​ ​trying​ ​to​ ​protect​ ​yourself​ ​from​ ​going​ ​too​ ​far,​ ​too fast.​ ​Your​ ​burn​ ​rate​ ​is​ ​how​ ​much​ ​you​ ​are​ ​spending,​ ​against​ ​your​ ​incoming​ ​revenue.​ ​If​ ​your​ ​burn rate​ ​is​ ​too​ ​high,​ ​then​ ​you​ ​are​ ​essentially​ ​hemorrhaging​ ​money.​ ​In​ ​these​ ​instances,​ ​it​ ​is​ ​time​ ​to slow​ ​spending,​ ​so​ ​that​ ​cut​ ​back​ ​how​ ​much​ ​you​ ​are​ ​putting​ ​into​ ​your​ ​small​ ​business.​ ​The​ ​burn rate​ ​for​ ​small​ ​business​ ​is​ ​high,​ ​and​ ​you​ ​do​ ​not​ ​want​ ​to​ ​become​ ​another​ ​statistic.​​ ​If​ ​that​ ​means slowing​ ​down​ ​and​ ​gathers​ ​some​ ​funds,​ ​it’s​ ​wise​ ​to​ ​do​ ​so.​ ​​ ​It’s​ ​better​ ​than​ ​digging​ ​an​ ​enormous financial​ ​hole.​ ​

When​ ​you​ ​spend​ ​beyond​ ​your​ ​means,​ ​you​ ​put​ ​yourself​ ​in​ ​jeopardy.​ ​What happens​ ​when​ ​you​ ​have​ ​burned​ ​through​ ​your​ ​finances,​ ​but​ ​run​ ​into​ ​a​ ​tax​ ​penalty​ ​or​ ​regulation fine?​ ​If​ ​you​ ​don’t​ ​have​ ​the​ ​reserves​ ​or​ ​savings​ ​to​ ​pay​ ​it,​ ​your​ ​situation​ ​goes​ ​from​ ​bad​ ​to​ ​worse​ ​in moments​ ​and​ ​sends​ ​you​ ​into​ ​panic​ ​mode.​ ​Always​ ​keep​ ​some​ ​reserves​ ​in​ ​the​ ​coffers,​ ​just​ ​in​ ​case.

Conclusions 

In​ ​their​ ​earliest​ ​stages,​ ​small​ ​business​ ​startups​ ​are​ ​fragile.​ ​Often​ ​what​ ​makes​ ​the​ ​difference between​ ​a​ ​successful​ ​startup​ ​that​ ​ultimately​ ​blooms​ ​into​ ​a​ ​still-growing​ ​business​ ​and​ ​one​ ​that flops​ ​quickly​ ​out​ ​of​ ​the​ ​gate​ ​is​ ​how​ ​frugal​ ​their​ ​owners​ ​are.​ ​It​ ​easy​ ​to​ ​want​ ​to​ ​go​ ​a hundred​ ​mile per​ ​hour.​ ​After​ ​all,​ ​many​ ​of​ ​us​ ​dream​ ​of​ ​owning​ ​our​ ​own​ ​small​ ​business,​ ​so​ ​to​ ​see​ ​that​ ​dream come​ ​to​ ​fruition​ ​is​ ​incredibly​ ​exciting.​ ​This​ ​high​ ​paced​ ​excitement​ ​is​ ​necessary​ ​to​ ​get​ ​the​ ​wheels moving​ ​and​ ​push​ ​you​ ​through​ ​the​ ​early​ ​stages​ ​of​ ​your​ ​business,​ ​but​ ​it​ ​can​ ​also​ ​be​ ​a​ ​detriment​ ​if you​ ​let​ ​it​ ​get​ ​ahead​ ​of​ ​you.​ ​Without​ ​proper​ ​planning,​ ​sound​ ​financial​ ​practices,​ ​and​ ​careful spending,​ ​that​ ​dream​ ​can​ ​turn​ ​into​ ​more​ ​of​ ​a​ ​nightmare.

Guest Post by Trey Rollo 

About the author

From time to time, we feature outside authors on fincyte and publish their informative guest posts online. This is one of those selected guest posts.

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