Every company, big or small, is always concerned about one thing and that’s managing money. Proper financial management is crucial if you want your company to survive. It’s also important if you want to survive the industry competition.
As a student wanting to start a business on campus you’re taking on a real challenge. You’re already busy with studies, sports and perhaps extramural activities fitting in a side hustle will be tricky albeit worth it. Having a side business and handling everything from marketing, advertising and finance might add pressure and stress to you so you need to be really sure of your decision. There are several key factors to consider including the startup cost and financing before you look to start a side business.
As a small business, you need to exercise caution with your financial decisions from the very beginning. It takes more than just a good business plan to run a business. The idea should be simple and require minimal startup costs as you don’t want to incur additional debt. Remember, you’re still a student and education should remain your main priority. With that in mind, your business idea should be relatively easy to manage and not take a lot of your time.
Educate yourself
One of the first things you have to do is educate yourself about the different aspects of financing. To start off with, learn how to read a financial statement. This is an important document that’ll tell you about your money, where it originated from and what some of it was used for. The financial statement includes four essential details: cash flow statement, income statement, balance sheet and statement of shareholders equity. Make sure you’ve familiarised yourself with all of this as you need the knowledge and understanding to finance effectively.
Do market research
Before you start with your business, you need to do market research to check whether there’s a need for your product or service. Be sure to evaluate each concept individually, in terms of both your chosen market and how you intend to reach your target market. It’s vitally important for the success of any business. Understanding your market is key to ensuring that you provide the right goods or services. You don’t want to invest money in a business only to find that there aren’t a need for it. What then? Therefore it’s important to do your market research first before putting money into your business.
Set up a budget
Before you make money, you have to figure out how you going to spend it. Drafting a budget is a key way to help you turn your dreams into reality. With a budget, you can see where your money is going, how much you have left and how much profit you made. If you need any necessary items to start your business, it has to be on your budget as well. With that, you’ll know how much you’ve spent on everything and be able to work out how your business will help to get that money back. Whether your business is product or service-based, having the necessary equipment is vital to keep your business running smoothly. And for that reason, it’s important for you to know how to finance your equipment effectively. Buying equipment for the first time can put a serious pinch on your cash flow but with the right financing and set up of a budget, you can get all the things your business needs.
Measure the performance of your business
As a business owner, it’s important that you keep tabs on the movement of your money. Make it a habit of looking at your company’s financial statements every month and comparing it with those of previous months. Set goals and identify exactly what you want to achieve. What do you aim to accomplish? Write down your goals in as much detail as possible. Goals should present challenges to your business but none you can’t accomplish. Being aware of these aspects will help you make informed decisions for your business. With relying on your financial statements as your primary indicator for performance, you can also develop KPIs that fit your particular enterprise.
It’s important that you as a small business entrepreneur keep your expenses in check. As a small business owner, you need every cent, so there’s no time to waste money on unnecessary things.
While owning and running your business at such a young age can be exciting but also nerve-wracking at the same time, especially when it comes to financing your business. Take these four tips into consideration and don’t let your business suffer from poor finance management. Being an entrepreneur at such a young age is great, so give your venture a bright future.