You could be one of those who have an idea that can be turned into a business venture. Congratulations, for you, are one of the backbones of our economy. Although your idea might seem small, there is every tendency that it could be developed into a large enterprise. You can go as high as you want if you have a good business plan, the right idea, and an amazing marketing plan.
While trying to start a business, you will discover that this journey is a daunting one. For it’s stated in history that only two-thirds of businesses survive the first 2 years. And half of the businesses will fold up within the first five years. With this ideal in mind, you could be wondering if it’s a great step to turn your idea into a business.
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It’s obvious that there are no guarantees in life, therefore, every entrepreneur must answer these questions before they launch their businesses.
The cost of your business
The cost you should take cognizant of before starting your business is the initial startup cost and the ongoing overhead expenses. This means you have to do a thorough calculation of what you would need to get your business off ground. Again, do a thorough calculation of what you would need to get it to the stage it will start earning revenues.
The overhead expenses are those costs that are required to keep your business moving forward. Such costs include rent, internet service, phones, salaries, and other expenses. Those regular expenses that will be incurred as you go on need to be addressed with as much accuracy as possible. Try not to run this calculation based on assumptions, and overestimate those costs, instead of underestimating them, so you don’t run into issues.
Your cash flow
First, you have been able to evaluate your expenses, the next step is to calculate your potential cash flow. Your potential cash flow is the amount of money that will come into your enterprise on a daily, weekly, monthly, quarterly, and yearly basis.
The best advice is to consider the worst-case scenario here. Why? The reason is although you might want your business to kick start and skyrocket to profit, it might likely not. Judging from this mindset, if your company does well upon starting it will be a great feat. Without beating around the bush, the takehome here is to be realistic about your revenues expectations.
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How do you get funding for your business?
Once you have a realistic feel of your financial projections, the next step is calculating how much funding you need to start. To be on the safe side, you should have a lump sum that will fund your business for six months or more. Remember we earlier talked about overestimating, don’t forget, this puts you on the safe side too.
The next question is where will these fundings come from? You can get funding for your startup through a series of means, but, the popular ones are your savings, or borrowing from friends and family.
This doesn’t take away the fact that you can get funding from the government, venture capitalists, angel investors, etc. But this will be dependent on the sort of business you are looking to build. Notwithstanding, you can access small business loans as well, but there will be certain restrictions and criteria before you qualify.
However, a lot of entrepreneurs take advantage of all or some of these options to fund their startups and you can do so too. Regardless of the option you choose, do not forget to manage your personal and startup expenses when you start. If you are not careful with those expenses you might run into huge financial losses and strains.
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Starting a business doesn’t mean you have to stop keeping up with paying your bills, putting money away to your retirement accounts, emergency funds, etc. Dealing with this might entails calculating them into your business plan, and counting them as part of your business operating costs.
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Where do you see yourself and your business in the Next 5-10 years?
Did you answer that question with regards to your business? Well, not bad, only, you shouldn’t tackle this question in this area alone. It’s important that you also look at your finances and set goals for the position you want to be in the next few years.
Therefore, go ahead and develop a plan for what you would love to achieve 5-10 years from today. Then move on and do these projections for your business as well. It will help you focus deeply on the day-to-day operations as it compounds towards your five to ten years goals.
Ultimately, it can be time-consuming and frustrating to operate a new business, as they would be things that don’t go as planned. This is why it is a good thing to have long-term goals. It will help you stay on track as long as you can picture how your hard work will pay off in the future.