How New Business Owners Should Deal with Financial Stress

Starting a business can be very exciting, but it can also be very intimidating. There are so many things to contemplate and steps to take, and it’s all up to you. This puts a lot of pressure on new entrepreneurs and even seasoned professionals. When you start a new business it’s incredibly important to have […]

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Starting a business can be very exciting, but it can also be very intimidating. There are so many things to contemplate and steps to take, and it’s all up to you. This puts a lot of pressure on new entrepreneurs and even seasoned professionals.

When you start a new business it’s incredibly important to have a financial plan. This plan should take into account the funds you need to get up and running, what will be needed as you grow, when and how you will get paid and even what you will do personally with the money. Having this plan in place can help to alleviate some of the stress associated with starting a new business. That isn’t to say there won’t be bumps in the road but at least you can have a plan to fall back on and make adjustments as needed.

Fortunately, there are enough business owners who have done this before that you can learn from their successes and their failures. We have curated a comprehensive guide to assist you in knowing how to start a business and how to handle the financial aspects.

Before Starting Review the Sources of Capital

Loans: A loan is an aggregate of money provided immediately to the business, which must be repaid within the agreed time frame, plus interest.

Grants: A grant is a donated amount of money that does not need to be repaid.

Investors: Investors provide capital to the business and can be repaid in a variety of ways. Often, the investor offers wealth in exchange for a percentage of the company.

If you determine that you need loans or investors to start your business, a financial advisor at your bank can help. And while you’re at it, take the opportunity to open a full business account. Better not to manage your business banking transactions through your banking account. 

If you are starting your business as a woman, PANDC, or member of the LGBTQ community, look for a banking institution that supports entrepreneurs like you. There a ton of programs that help disadvantages communities when staring a business. Special grants and loan programs may be available.

Review the Financial Aspects to Consider Starting a Business

In your business plan, you should have estimated your start-up costs, from out-of-pocket expenses (like incorporation) to the higher costs of purchasing products if your business sells goods, rents premises, and hires staff.

Realistically estimate what it will cost to start your business and determine if you have set aside enough capital to cover the costs of starting your business and the costs of its first year of operation. Since you cannot rely on the first year’s profits to cover your expenses, you have to be very careful with your budget and financial forecasts.

Once you have your business finances in order, you can take a breadth and be relieved that you have things organized. Now it’s important to take control of your personal finances and retirements investment program. Personal finances are the number one cause of stress for 73% of people. Here are some tips to manage personal finances for business owners:

  • Build an emergency fund: Every business owners should stash away the equivalent of 6-12 months of personal bills. This helps provide a backup in the event of a business catastrophe (like the COVID-19 pandemic).
  • Set up a retirement fund: It’s incredibly important for small business owners to start investing in retirement early. You can’t just count on selling your business one day and sailing off into the proverbial sunset. Create 401k and IRA plans for yourself and your employees. Take all the extra profits and put them into investment accounts like mutual funds.
  • Diversify your investments: 401k’s and mutual funds are great for steady growth over a long period of time, but you want to diversify across different investment classes. Things like precious metals (gold, silver, etc.) and cryptocurrencies are great options. Bitcoin for example can be highly volatile but it can also create significant profit opportunities. Consider opening a cryptocurrency exchange account on OKEx, Coinbase or Binance to start investing.

Wrap Up

Starting a business will always be an exciting and scary endeavor. Knowing how to start a business takes years of experience, and even then, life sometimes has some nasty surprises in store for us. The best tip to keep in mind when starting a new business is to be ductile. Use these parameters as a road map, seek advice from trusted advisors, and stay positive. You are sure to experience setbacks. Starting a business will likely cost you more and take more time than you expected. How you and your company choose to address these challenges will define who you are as a leader and where your business fits in the market.

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