When it comes to finances, startups and business owners have got their own work patterns. They have to look after their business’s finances and manage other personal finances, as well. With business and personal priorities not aligning, at times managing both the thing will feel like a difficult task.
However, being a business owner, you cannot lose control of your finances. So, here are a few personal finance tips shared by Lyle Advisors for startups that will help you to stay alert on your money when you are managing your small business.
Lyle Advisors Personal Finance Tips for Startups
Value Your Time
When you are working the whole day, ask yourself 2 questions:
- Am I using my time rightly?
- What is ROI for any activity?
It will be helpful to calculate your “per hour rate” based on your skills and average revenue that you generate on an hourly basis. Suppose your per hour rate is $90, then hiring a digital marketing consultant makes sense. Whereas they polish your social media status, you will prospect for the new clients and pitch investors—possibly higher-ROI activities.
The budgets & time constraints can force you to do tasks, which are under your “rate;” which is totally normal for any startups. But, knowing your time value will help you to make better decisions on outsourcing and delegating the tasks.
Be Honest and Open with Lenders and Investors
There’s nothing that can get you in trouble in your business than dishonesty & lack of communication –it is true for the early-stage businesses looking to get a loan or raise money. Suppose you act secretive and shady, people will not trust you. In the same way, if you’re not able and unwilling to reveal the right numbers that drive to succeed in your business, you will lose the trust of your capital sources.
If you’re an entrepreneur and do not have any investors, you can find advisors & hold quarterly meetings to talk over the numbers. It is a good practice & way of getting additional ideas and support for the company.
Never Overspend on Team Building
Hire for those positions that you need and always rely on part-time employees or freelancers if possible. Flexibility and creativity are some important qualities that you need to look out for. Safeguard yourself by outlining confidentiality, IP ownership and termination provisions in the employee contracts & hiring documentation. Equity can be an important part of your puzzle, but a structure in the incentives based on hitting important milestones and delayed compensation arrangements.
Grow your Budget
Calculate all your expenses & subtract them from the revenue that you are making. Identify resources you will need (associated costs) after hitting all your milestones. When you have worked it out, you will be in the position to balance it against your liquid funds. This process can be iterative, so you must expect to rebalance your priorities when you hit every milestone.
Managing your working capital, primary cash at such a stage is very important as liquidity is one huge concern. Look in the vendor financing and stay strategic with the sales and marketing strategy – and target selling opportunities, which deliver very high returns when being very cost-effective.
Learn to Manage the Cash Flow
One main reason that company fails is when they go out of cash. Cash flow is the #1 financial metric that you must learn to control while running a business or company. Suppose you do not know where all your money comes and goes, you are at a high risk. Creating the budget and sticking over it is important in the startup.
Set Up Clear Goals & Milestones
When you’re the early-stage entrepreneur, it’s simple to waste your time over-thinking the concept. In fact, time spent in daydreaming an idea rather than testing your business concept with the potential customers will be the wasted time.
So, to mitigate such risk, you need to set some measurable deadlines and milestones early on to track your progress all along your way. How to find the difference between the goal and milestone? The milestones are signposts on your way towards the goal that will show you the right way how you are performing with time.
Also Read: Top 5 Master Data Management Solutions
As a busy business owner, you may need to put in more work to get your hand on the business and personal finances. However, being smart in handling your money from the beginning of your business can pay off in the long run!