Money Basics You Need to Know for Your Business

Starting a business from the ground up is not easy, it requires a certain level of financial understanding and funding. Fortunately, you do not need tons of cash to get started or be successful. There are seven key money basics every entrepreneur should know for their business.

Money Basics for Business Owners

From a financial perspective, you want to have the right groundwork for long-term financial health and make sure your business can be profitable. Follow these steps to be on your way to financial success.

Create a business model and business plan

The first step you should take is create a business model and write a business plan. You will need to figure out what your business idea is, describe your plan of execution, discuss how you will stand apart from your competitors, and bring in revenue.

The business model and business plan work hand in hand. The business model focuses on how your business will make money while the plan defines your company’s objectives, finances, demographics, leadership, and more. Both are often requested if you are seeking partnerships, financing, or other business opportunities.

Understand your market opportunity

You need to determine your market size by first defining who your market is. You also need to know how to price your product or service correctly to calculate your potential gross sales. Factor in your own costs so you can make a profit as well.

Calculate startup and operating costs

Two costs to consider are how much it will cost to get your business off the ground and how much it will cost to keep your business running.

Startup costs include the following:

• Market research
• Fees
• Technology
• Inventory costs
• Marketing and advertising
• Office space
• Financing
• Employees

Get funding

Cash flow is usually tight for startups so consider these common sources of funding:

• Keep your day job: if you have a steady paycheck consider staying put and build up your new business until you are financially ready
• Savings: set aside a certain amount of money each month to use only for business related expenses.
• Consider financing options: it can be hard to get loans from banks and traditional lenders but there other options to consider such as crowdfunding, angel investors, and family and friends.

Set up a business checking account

Keep your business and personal finances separate. Business checking accounts offer liability protection which means your personal assets will be protected if your business ever gets sued.

You are more likely to have simple and accurate tax filings since you will not have to comb through your personal bank statements to find business expenses.

Also, it will help you have the flexibility you need to grow, especially when you are opening a business bank account.

Incorporate your business

Incorporate your business into an LLC, S-Corp or C-Corp so that your business is separated from you which provides liability protection and keep your personal assets safe.

When you incorporate, you will get an EIN that traditional banks require to open a business checking account or to apply for a business loan. Incorporating gives your business more creditably with vendors, suppliers, potential partners and investors.

Learn financial basics

Understanding financial basics will help you with all things business finance. For example, learn the difference between cash flow and profit and freshen up on your finance vocabulary and terms.

The Bottom Line

By now you should have a solid understanding of how to set up your businesses’ financials, so next is to think about your launching strategy. Consider finding a business mentor or advisor, forge launch partnerships, and do not forget to open your business checking account as soon as possible.