Written by Ismail Abdur-Rahman, CEO
Congratulations! You have decided to become an entrepreneur. Welcome to a universal family of people who value intellectual freedom and the opportunity to make an impact over the security of health insurance and a bi-weekly paycheck.
Now that you've taken the plunge, it's time for us to have a talk. You know, that talk. We need to talk about finances. More specifically, we need to talk about how to manage your personal finances separately from your business finances. Trust me; it's much safer this way.
Separate, Separate, Separate
The temptation for many inexperienced entrepreneurs, especially for solopreneurs, is to sort of pool all of their money together and pay what needs to be paid whenever things need to be paid. Sure, that seems logical at first, but it opens up the door for a huge financial mess down the road - not to mention potential tax and liability issues. The most prudent thing to do is to maintain separate personal and business bank accounts for checking, savings, and credit cards. This type of logical division of accounts makes it much easier to track where your money is, where it's going, and which of your assets belong to you - and which ones belong to the business.
Get on Track
Speaking of tracking your money, tracking your cash flow is a must, as most startups fail because of cash flow problems early on. It’s supremely important for you to create a reasonable budget and track revenue, expenses, assets, liabilities, and, most importantly, cash flow. As an entrepreneur, you have to be vigilant about the financial position of your company in the early stages, and this is especially true if your hope to be able to approach potential investors or partners. You don’t need to be a finance whiz kid in order to keep your financial house in order, either. There are literally dozens of cloud-based programs that you can use to not only keep track of your finances, but also to automate bill payments and investment account deposits.
You can’t be all things to all people. Stretching yourself too thin will exhaust you and make you less effective in dealing with your clients who pay you for your expertise. If you are not an expert in finance, hire financial professionals to add value for you in the same way that you do for your clients. Build a team of financial professionals to help you plan and track your business and personal finances in the early stages so that things run smoothly for you as your business grows. Additionally, it might make sense to outsource some of your project work in the interest of time and efficiency. Finding professionals with whom you can collaborate will add value to your growing business by ensuring on-time, quality delivery of work, while building your professional network at the same time.
Invest in Yourself
As an entrepreneur, you are your business, and there is precious little difference between you and your brand. In addition to making sure that you pay yourself first, you should be sure to budget time and resources to your continuous professional development. Be on the lookout for emerging trends in your market and be sure to upskill to keep pace with the demands of tomorrow, today. Take short certificate courses instead of enrolling in lengthy degree programs in order to capitalize on the knowledge you gain and put it to immediate use. Being able to speak the language of business with a keen foresight and analyze historical performance against future projections will build your clients’ confidence in you and allow you to forge new business relationships that can carry your business forward.
Once you have made a concerted effort to bring your financial house in order, you can turn your attention to the details of growing your business and achieving your long-term objectives.