A survey from Gallup.com revealed that 50% of Americans has a higher level of financial confidence. This is an improvement compared to the 46% last year. The respondents of their survey revealed that their personal finances are excellent or good. This is a good sign that the country is really back to its pre-recession days. In fact, Gallup revealed that this is the highest level of confidence displayed since the Great Recession.
47% of their respondents said that their financial position is getting better – while 38% said that it was getting worse. If you are one of those who feel like their finances are improving, do you think now is a great time to take your finances to the next level?
When you are confident, that is the best time to take risks. Of course, rational thinking still has to come into play but your confidence will give you the courage to take the first step towards financial abundance. If you are burdened with money stress, both your mind and finances cannot afford to risk your current position.
One of the best ways to improve your finances is to be your own boss. Since financial confidence is high, do you think you can not afford to be your own boss? Can you finally start the business that you had been dreaming of for so long?
Signs that you are financially able to start a business
According to an article published on USAToday.com, 2016 is a great year for small business owners. The article cited these reasons:
- Increase in sales
- Payroll growth
- New technology
- Improving economy
- Favorable lending conditions
53% of the respondents in the survey said that this year is a great time to switch to becoming a small business owner. Since financial confidence is up, people should grab this opportunity to take the risk.
To know if you can be your own boss, here are the financial signs that you are ready to start your own business.
You have a capital.
Almost all businesses require a capital – some more than the others. You have to be ready with this capital before you switch from being an employee to an entrepreneur. Regardless if you will borrow a business loan or you are using your savings, this is an important sign that you can be a small business owner. Without this fund, you have nothing to start your business with. If you still have to apply for a business loan, you may want to hold on to your day job first – at least until your loan is approved.
You have an emergency fund.
Remember that at the beginning of your business, all the money will be coming out. There won’t be much cash coming in. You need to be ready with your personal finances because a lot of things can happen. Without an emergency fund to finance your personal needs, you might be tempted to give up your business dreams and go for a more stable income source – like being employed. So make sure your personal finances are secure first so you do not have to worry about this part of your financial life.
You can manage your money.
An important quality of a good small business owner is your ability to manage your finances. Believe it or not, the top reason for a business to fail is incompetence. According to the data on StatisticBrain.com, 46% of business failures is caused by incompetence – specifically the lack of knowledge of financing record-keeping, planning, pricing, etc. You do not need a degree in Finance to be a manager of your own finances. But you need to know how to create and maintain formal financial records. There are tools online to help teach you the basics. Once your business grows and you can afford it, hire a professional to take care of the money management side for you.
Your finances are not tied to a major milestone in life.
Things like buying a house, getting married, or having kids – all of these are major milestones in your life that usually require a lot of money. If you have plans to spend a huge sum of money, it might not be the right time to become a business owner. Do one thing at a time. Choose if you want to focus on reaching your life’s milestone first or your business.
You are ready for the risks.
Finally, you have to be ready to take risks. This is why financial confidence is very important. If you are not ready, then do not start your own business. A lot of startups fail for a lot of reasons. You need to be ready to lose whatever you are investing in your business. Otherwise, it will destroy your financially and emotionally. Maybe even mentally.
Of course, financial confidence is not enough to start your own business. You need to look for non-financial signs like having a marketable product or service that people would want to pay for. You should also be ready to learn, make sacrifices, and work long hours to make your business flourish. Expect that it will be very hard for now. This is why business startups should have a passionate owner behind it. Without passion and dedication, you might give up even before you have achieved anything.
You should also make sure your idea, product or service has a sustainable demand. Take note that you can sometimes create a new demand – since consumers are changing all the time. Pore over your plans and think about all the steps and sacrifices that you need to take. Being your own boss is great but you need to ensure that you have the financial confidence to take that first step.
Financial tips for new small business owners
Once you have started your business, there are a couple of tips that you need to follow in order for you to succeed. Remember that a lot of startups fail. To avoid being part of the statistic, follow these financial tips.
Organize your finances.
All businesses have bookkeeping requirements. You have to ensure that you can meet this need. If you have no idea how to do it, then get a software that can help you manage the financial side of your business. Being organized can help you make more money. It will help you identify what needs to be paid, how much the business is earning, etc. An organized financial record will help you make the right decisions about your business.
Do not delay financial tasks.
A startup involves a lot of tasks. You might even find yourself working overtime. That is to be expected – and encouraged. You need to understand everything about your business and being hands on will help you do that. But even if you have a lot of things to do, never delay financial tasks. Especially when it comes to paying your bills and taxes. These will have to be done at one point or another. You are just delaying things and piling the work. That will make you even more hesitant to work on it. When you delay it, you might lose opportunities or waste money.
Understand your cash flow.
It is also important to understand your cash flow. Know when the peak seasons are for your business. That way, you can manage your finances well to prepare for the lean months. If your business is involved in the tourism industry, your profits will be tied with the months when visitors are high. Think about this and make your business plans according to when your peak and off-peak seasons are. Knowing the sales cycles will give you an idea when to give out discounts, release new campaigns or products.
Keep your overhead expenses low.
You should also think about your overhead expenses – all the time. Keep it low if you can. While you are just starting, why not take one room in your house and set it up as your office? You can think about moving to another office once your business grows. And if you can get your furniture from second-hand stores, why not? It will save you money and will give you more cash to invest in the business.
Get freebies and discounts if you can.
Believe it or not, you can get freebies if you are brave enough to ask for it. You can get in touch with fellow business owners and tell them about your startup. They might give you old furniture or even a great advice. They know how hard it is to start a company. They might empathize with you and this a great way to make connections.
Be careful with the use of credit.
Finally, you have to be very careful about how you use credit. It is true that debt used for business is a good debt because it has the potential to put money in your pocket. However, business loans can drag your company down if you fail to pay it back. If you use a business credit card, make sure you can pay it back immediately. Also, make sure that it is only used for business only – and not for personal use. You might rack up debt that is not related to the business – that can be a problem.