Growing small business requires you to manage the finance well. One of the most common reasons of why small business is more failure-prone is due to lack of cash. Therefore, it is essential for you to manage your money if you want to build your small business successfully. However, it is not as simple as it sounds because even some of successful people admitted they were lazy to do manage their finance thoroughly. One of the most common obstacles in managing money is differentiating personal and business finances.
Money management for successful small business owners
Finance is essential for business. Financial management plays important role to the success of your small business. Therefore, playing it smart and detailed can pay off all the troubles. You can use some strategies to manage your finance well. Here are some of them:
Emergency saving fund
Always remind yourself to have emergency savings fund. The majority of financial planner suggest that small business owners should at least have three to six moths worth of living expense, after taxes, in an emergency savings fun. The emergency fund is necessary because the downturn in business can be unpredictable. It is also possible for seasonal fluctuations in cash flow to happen. Your emergency saving fund can be your life saver during those periods.
Detailed personal finance
Manage your personal finance as detailed and thorough as you do to your business finance. Keep in mind not to mix them both. Separating them is essential so that it won’t cause any problems in the future. Also, it is highly suggested that you manage your personal credit card (if you have any). most small business owners have credit card. Make sure to make it stay solid by paying your bills on time even if you are in tight situation. This is a strategy to prevent you from costly mistakes. Your business finance is important for your small business. However, your personal finances need to have stronger foundation too.
Save for retirement
Invest more for your retirement. It is often forgotten because most of business owners tend to invest a lot of their profits back into the business. Meanwhile, there are more great options you can pick. The amount of the investment for retirement you can start depends on your income as well as qualifying factors. Not to mention that you also have wide selections of investment options to pick. Investing in broader range of opportunities is a good idea because your current business is already your biggest investment after all.
Think about diversified portfolio or assests
Even if you are considered young, you can start investing. However, make sure that you invest in a diversified portfolio of assets instead. Therefore, they will be more appropriate for your risk tolerance as well as time horizon. However, sometimes, it also depends on your own personal goals. You may have already had your own investment goals you want to achieve. It can determine the percentage of your portfolio of assets. If you aim for long-term investment, stock can be the best option for you especially when you are young entrepreneur.