Financially Preparing for Your First Year in Business

During the extended economic downturn, many people have been forced out of the workforce or are underemployed. This has led some to consider starting their own businesses. But, for every entrepreneur that has achieved great success, there are many more who have struggled. In light of this, what are the financial considerations of starting a business?

Be Prepared to Weather the First Few Years

Some say it takes 3-5 years for a startup to become profitable. This is misleading for several reasons. First, it is difficult to cite a set number of years since this varies based on the business. Secondly, the company itself might not show a profit, but that does not imply that the owner did not draw a salary. If the revenue was sufficient only to cover the owner’s salary and operating expenses, there is no net profit shown on the books. However, the owner, in fact, had personal income and revenue.

Nevertheless, it is crucial to understand is that during the first year you will likely earn less than your previous job. And, it is possible that after expenses are paid, you will bring in very little or possibly no salary. It may take several years to build the business to the point that you are making the equivalent in salary and benefits to your previous full-time position.

Be prepared to weather that financial slump. Prior to launching your business, build your savings and reduce expenses. It helps to clarify which purchases are needs and which are wants. One way to do so is to identify which purchases bring real value to your life and which are driven more by the desire to meet other people’s expectations. Consider when you can delay purchases and wait for sales instead of paying full retail price.  This can help your first year in business go more smoothly.

Leverage Technology to Reduce Costs

There is no way around the need for strong technical capabilities in today’s market. When properly leveraged, technology can be a competitive advantage and drive costs down. But, improperly configured cloud services, poorly designed architecture, and reactive IT support can cost money and time, and result in lost business opportunities.

To minimize downtime and ensure timely and quality support, you should consider contracting with an established IT services firm. When selecting an IT service provider, the paramount considerations are depth of expertise, breadth of capabilities, responsiveness, and commitment to customer satisfaction.

While a variety of support options are available, keep in mind that system downtime, viruses, and instability can sidetrack productivity and frustrate clients. So, one must careful weigh the benefits of relying on retail support services or freelance technicians instead of finding a reliable and experienced service provider.