Running any type of business comes with countless challenges, and most times, there’s just not enough time to get everything done. Over 40% of business owners report that handling finances is challenging. If you are having these same challenges, you are not alone. Whatever type of business, the following 5 business success tips for entrepreneurs can help you be successful.
1. Business Bank Account
Set up a business bank account if you haven’t already. This is a must.
Think about the current volume of your personal bank statement. Now, add the number of transactions you’ll have in the first year of business and if your business continues to grow, the complexity and transactions grow as well.
When you mix your personal and business accounts, overspending becomes very easy. It’s hard to track your profitability and monitoring your expenses. It becomes hard to run an efficient business.
During tax season, you need to be prepared to document and delineate each transaction in detail each year and if you mix personal and business transactions, this process will become overwhelming.
Keep in mind that while you personally may never get audited by the IRS, there is a possibility that your business will. An audit could be no big deal so long as you have clean record keeping.
This is an important business success tip for entrepreneurs that is quite easy to achieve.
2. Monitor your spend
Are you aware of how much you are spending on a given day?
Small expenses if left unmonitored can grow into a large problem.
No expense is too small to be recorded – team lunches, buying a coffee maker, etc
Quickbooks is an inexpensive financial tool that helps you monitor your business transactions.
One of the biggest benefits of budgeting is documenting your financial goals
A budget when compared to your actual performance will help you truly understand your business performance
If you are exceeding your budget goals, you can reinvest the additional funds or you can put them into savings
If you are performing worse than your budget, you can very quickly pinpoint the problem areas
Creating a budget should not be a complex exercise. It’s coming up with realistic assumptions based on benchmarks in your industry. Checking out your local chamber of commerce could give you benchmark information.
It is not pleasant to be surprised by a tax bill!
If you don’t understand taxes, you need to hire a tax pro.
As a business owner, not only do you need to pay income tax on the profits your business generates, but you also need to pay the 15.3% self-employment tax.
This gets expensive quickly.
Your tax pro can help minimize this impact by making sure that you are taking every possible business deduction.
If you choose to pay yourself through owner’s draws, keep in mind that there are no taxes withheld and this will impact your tax liability. Your tax professional can help you figure it out.
5. Cash Reserve/Savings
Seventeen percent of small businesses said they would have to close down or sell if they experienced a two-month loss in revenue, according to a Small Business Credit Survey.
How much cash reserves should you have? A good rule of thumb is three to six months of expenses
But how do you figure this out?
To start, take a look at your budget. This will include your expense buckets. It will include your direct expenses as well as your operating expenses. Take the average over the 12 months to come up with your monthly estimated expense. You can multiply by three to six months to figure out how much in reserves you will need.
For example, if you have $5,000 in average monthly expenses, you will need to aim for cash reserves between $15,000 to $30,000.
I am hopeful that these 5 business success tips for entrepreneurs will get you closer to a successful business.