Starting a business can be daunting,
especially when 60% of new businesses go under within three years and 20% shut
down within a year. Well, businesses fail for several reasons. Some slip up
tapping into finances and some fail to attempt to shield from the competition.
Whether you start with an online store
or a company, you need to gauge the likelihood of the success of your business.
Switching from your side gig to a business can be a big move. It seems to be
very exciting to be your own boss. You gain freedom and more control over your
schedule, above all, you do not feel like stuck in a rut. You do not have fear
of office politics, nor do you have surprises of unexpected employment.
Starting a business without setting a
direction and goal can leave you ruing the day. It is paramount that you
consider you have the potential to run a business. Here is a process that will
help you know how much you are ready to start a business.
Assess the budget for expenses for beginning months
You know very well your business is not
about to generate profits within a couple of months. It takes time to reach the
breakeven point. You should have enough money to pay your regular expenses
along with business operations.
In the starting months of your business,
your money will go in marketing and inventory cost. Make sure that you have set
a budget for meeting all these expenses.
The size of the budget depends on rent,
utilities, food, and other expenses. Make sure that your budget is worth
six-month of your living expenses. Apart from these funds, you should have some
money to assist your business operations as the level of sales will be a bit
low in the beginning.
Do you have enough clients to use your product or service?
Your journey can be a lot easier if you
have clients who are eager to use your product or service. If you begin
searching your clients after your complete setup, you will have to aggressively
market, and you will likely sit idle for a couple of months, sucking your
budget.
Even though you will not stop marketing
down the line, you should have a few clients in advance whom you will approach
as soon as you settle your business. You can hire a marketing expert who will
guide you on how quickly you can reach out to your target audience.
Having a few clients will allow for a
flow of money. As long as your business receives an injection of cash, you can handle
to pay your fixed expenses like rent and debt payments.
If you are looking to take out a
business loan, you need to have a repayment plan. Your budget will tide you
over unless the funnel of sales goes up, but you need to arrange money for the repayment
of your small business
loans in UK.
Have you paid off your current debts?
In the beginning months, outflows will
be greater than your income. if you have some debt at the time of starting a
business – even though it is nominal – you will have trouble to manage it.
Business consultants suggest paying off
all existing debts before you get it off the ground so that you do not face
financial instability.
You may need money to obtain a business
licence, purchase a commercial space, and for registration. Debt will take a
large chunk out of your pocket, making things more complicated.
The rule of thumb says that you should pay
off high-interest debt first. If you are juggling with multiple debts, try to
take out consolidation loans.
Tax payment will be a whole new thing
You need to understand the tax system
for self-employed. When you have a full-time job, your employer deducts taxes
from your pay and pays them, and you file your return at the end of the year.
When you are an entrepreneur, you need
to pay taxes quarterly. You may end up paying additional business taxes too.
Make sure that you understand your obligations and accordingly monitor the flow
of cash.
Even the tiniest thing can make a big difference
if you are moving to business. if you have no idea of your financial strength,
you should talk to an expert. You will get an insight into where you stand and
how far your dream business is.
Description:
In order to avoid unpleasant surprises, you should know your readiness before
starting a business. This blog discusses how you can measure it.
