Virily Editor
According to Google, an entrepreneur is a person who starts a business, despite the financial risks involved and in the hopes of making profits. One would assume that this definition would be enough to impress upon an aspiring entrepreneur the importance of having adequate finances, but the reality is to the contrary.
Amidst the general excitement of designing the brand identity, developing the product, or all the other launch-related activities that businesses have to contend with, finance still is the most critical of all in ensuring a business’ success.
Although not as exciting as selecting the brand name or designing a logo, cash flow management is one of the key factors that determines the success or failure of a business.
Financial management is indispensable for any business but entrepreneurs, especially, need to keep a sharp eye on their capital and where it’s spent.
Almost 90% of all new startups fail because of poor financial management. That is a considerably high number of failed startups that don’t prioritize the basics.
Here is a list of the financial skills every entrepreneur must learn to make it big in the market.
- Educate Yourself
You know your product, you know your target market, but are you confident enough to say the same about your business capital?
Usually, managers don’t know how to be financially prudent. It could be due to a lack of education in management best practices. Even in fields like healthcare management, you cannot escape the value of prudent cash-flow management.
If you are an aspiring nurse administrator, for example, you need to educate yourself through courses like online master’s in nursing administration, to get a feel for the leadership skills and the management practices that are going to save you from confronting financial constraints down the line.
Programs like these give you an excellent chance to learn from the operational and financial mistakes made by other professionals. Gain valuable entrepreneurial insights into your own role through such learning opportunities.
- Establish A Budget
In the early stages of a business, an entrepreneur has to wear many hats. You have to perform the duties of every role, from a CEO to running errands, like you are one of the staff.
Most entrepreneurs are highly creative when it comes to their product, service, or brand identity. All those aspects are very exciting, but unfortunately, they aren’t enough to sustain a business.
Even before you develop your product or service, you must know how much is it going to cost you. And that includes not only the product itself, but all the operation costs that are going into the realization of the launch of that product or service.
The best way to ascertain costs is through proper budgeting. From preliminary cost estimations to the concluding profit probability, a budget informs you of your financial footing at any given business stage.
A budget tells you what you can afford, where your capital is coming from, and where it is going. Simply put, establish a budget to always stay on top of your business expenses and profit figures.
- Raise Capital
It’s no secret that most entrepreneurs are high on ideas but lean on money. Nonetheless, no business milestone is achievable without capital input.
Realize the unique selling points of your business and learn to articulate them in a manner that piques potential stakeholders’ and investors’ interests.
It’s quite probable that at some stage of your entrepreneurial journey, you would need an external injection of funds as it has been reported that almost 60% of all startups need external investment to grow.
Raise capital through the following methods:
- Look for angel investors
- Launch funding campaigns
- Reach out to friends and family
- Consider applying for a loan
- Effective Project Management
At first glance, it may not look like something related to the business operations, but project management and budget management are closely related. Following are the project management aspects that directly affect your budget:
Over-due Projects: Projects that go beyond their due dates tend to surpass their pre-defined budget. Try to meet your deadlines to steer clear of any avoidable financial burden.
Promising unrealistic results: Taking on too many projects and promising to deliver unrealistic results may run your budget dry and eventually lead to a low-quality deliverable. A substandard deliverable may require time-taking revisions, cost you your payment, and bring ill-repute on your business.
- Establish An Emergency Fund
A business comes with its fair share of highs and lows. The highs may skyrocket your profits but the lows can be just as impactful. To deal with such unexpected risks, consider establishing an emergency fund.
Taking calculated risks is an entrepreneur’s bread and butter. Carried out without proper consequence management, however, this common practice can cause some serious anxiety regarding the future of your business.
Just like an average personal emergency fund, a business emergency fund should ideally have three months’ to a year’s worth of expenses stashed away for your business emergencies.
- Save As Much as You Can
On a surface level, a business may appear to be all about generating revenue. But saving money is as critical as generating profits.
Saving does not, however, mean producing less or allowing for your product’s quality to be compromised.
Following are some steps to keep your expenses to a minimum:
- Be on the lookout for vendors with the lowest prices
- Explore innovative ways to cut material costs
- Regarding staff, invest in quality rather than quantity
- Limit production waste
- Keep Business and Pleasure Apart
Keep separate accounts for business and personal use. It can be quite tempting to withdraw money from your business account for personal use, from time to time. But this urge you must resist!
Business budgets are set up to meet certain targets, and that’s why personal withdrawals from a business account should be prohibited unless you want your budget goals to get disrupted. Consider paying yourself a salary if your business is the sole income source you have.
- Forecast future expenditures
An entrepreneur must master the art of forecasting the future of their business. Your current business trajectory provides key insights about its future.
Many online platforms and tools offer accurate predictions about the future expenses and revenue of a business. Such insightful forecasts can help you attract potential investors and grow your business.
Keep Working on Your Skills
As an entrepreneur, managing the accounts and finances of your business may be the least appealing task for you. But you must invest time and effort in brushing up your financial skills because no business can flourish without adequate capital management. Start with educating yourself about financial matters. Next, establish a budget, save up and set up an emergency fund to save yourself from stress. All these steps will help you get on the right track toward wealth and success.
