Hundreds of thousands of people and businesses file for bankruptcy each year. Many more have economic troubles from which they never seek relief. If you have found yourself in a financial funk but are ready to start your own business, you might think that money troubles are an insurmountable hurdle. Fortunately, you are wrong, and you don’t have to have a perfect credit score to take control of your finances. Here are a few tips that can help you keep your money in check as you start your new business.
Create a Passive Income Stream
A passive income stream is one where you do not have to put in a 40-hour-week to create a steady revenue. It takes quite a bit of work in the beginning, but once you get going, you will have money to either put into the bank or channel into your business. One idea here is to launch a blog and an Amazon affiliate account. We explain that your content attracts users who then click on a link and buy a product from Amazon. When they do this, you earn a small commission.
Safeguard Your Personal Property
When you have suffered losses in the past, it makes sense to put protections to place now to reduce that possibility in the future. One way to do this as you start a new business is to file as an LLC. Each state has different rules, but tax advantages and management flexibility are the same. You can use an attorney, but you won’t spend as much if you do the research on your own and use a formation service.
To file, you will need a legal business name. Registering your LLC puts a buffer between you and any legal action taken against your company that might result in your personal assets being targeted. Small businesses get sued for a number of reasons, and any layer of protection you can add to yours will give you more confidence as an entrepreneur.
Pad Your Emergency Fund
Wells Fargo suggests that you need between three and six months’ worth of living expenses tucked away in an emergency fund. This is a great place to start, and you want at least that much if you plan to quit your job to start a new business. You may need to change the way you spend it now, but just remember that small sacrifices are just steps toward your goals.
Start Slowly
When you are ready to finally launch, avoid the temptation to go overboard. Start slowly by working on one product or service. You can grow on this foundation as you gain knowledge, experience, and a customer base. The larger your business gets, the more you can focus on sustainable growth. According to leadership training Institute IMD, sustainability can also mean prioritizing cost-cutting measures, such as minimizing waste and optimizing material usage. When you grow too quickly, you will miss out on a valuable opportunity to evaluate your business and make changes that perpetuate healthy growth.
Refine Your Ideas As You Go
Building on the idea of healthy growth, you also want to be open to refining your ideas. While it’s easy to believe that your initial thought process — whether that be a new product or service — is the best, you have to listen to your customers. As you pick up speed, you may find that the way you want things done doesn’t quite work for your customers or employees. Don’t be shy about making changes. It does not mean that your idea wasn’t good — all businesses have to adapt to be successful.
Money troubles don’t have to end your entrepreneurship aspirations. It is possible to build a business for yourself while also trying to rebuild your financial foundation. Remember, start small and do things that will give you a cash cushion (saving an emergency fund and having a passive income) so that you can focus on building a business that will sustain and enhance your lifestyle.