(ThyBlackMan.com) Operating your own business can be a dream come true. You can use your creativity to build a company that you’re passionate about. Entrepreneurs can also build flexibility into their schedules. It’s critically important, however, to plan your business finances. Without planning, your company may run short of cash and struggle to reach profitability. Use these tips to manage your finances:
Financing your business
Every business should create a formal budget each year. Your budget should include an estimate of your cash inflows and outflows.
Some companies can’t collect cash fast enough to finance their monthly operations. If you’re having trouble collecting cash quickly, consider these options:
- Factoring: Payroll Factoring allows you to take out a loan against receivables you are owed by customers. If you’ve sent $10,000 in invoices to clients, for example, you may be able to borrow against that $10,000. Truck factoring, for example, allows you to borrow on the value of a shipment you’re sending to a client. A factoring company lends you money and charges a fee. When your customer receives the shipment, they pay the invoice amount to your lender.
- Formal bank loan: You can also finance your business by taking out a formal bank loan. Bank loans may be difficult to obtain. You may have to provide collateral to secure your loan.
- Selling equity in your business: Equity refers to ownership in your business. If you need cash, you may be able to find an investor. Your investor contributes cash in exchange for a percentage of ownership. While this strategy allows you to raise more cash, you’re giving up some ownership control over your business.
If you need to raise cash to operate your business, consider each of these options.
The benefits of entrepreneurship
Creating a business can be challenging, but also very rewarding. Here are some benefits of operating as an entrepreneur:
- Following your passion: In order to work the hours required to succeed as an entrepreneur, you need to be passionate about what your do. Many people start their businesses to solve a problem they are passionate about. Other business owners take a hobby and turn it into a business. Having passion about what you do can help you overcome obstacles in your business.
- Creativity: Entrepreneurs can apply their creativity to their business venture. If you’re a great writer, graphic designer or film maker, for example, you can use those skills to build your business.
- Flexibility: Operating as an entrepreneur allows you to grow your business at your own pace. You can choose to keep your company as a small operation or grow your business rapidly.
These factors are attractive to many people who want to start a business.
How to start
The best way to assess your business idea is to write a formal business plan. The process of writing your plan will help your determine if your business idea is viable. You can find great software to write your business plan.
Managing your own business can be very rewarding, but your venture requires careful planning. Write a business plan and create a budget each year for your business. Your planning can help you generate sufficient cash flow and earn a profit.
Staff Writer; Jerry Wilson
