A new business venture comes with excitement, freedom, and money. However, you need to be aware of multiple business startup requirements no matter the industry you choose. These include financial requirements of the business, technical requirements of the team, and even the network of the founders.
There have been numerous cases where businesses closed prematurely because they could not get their finances in order. The first step everyone takes is to secure the initial investment, but there's a lot more to it. You can give your new business a better chance of survival by considering these four basic financial considerations.
Our team of experts at Lawrence Grant are available around the clock to help you finalise the list of things you need for your small business to become successful.
1. Keeping a line of credit
Apart from your initial investment, you will need funds to keep your business from shutting down during the early days. A line of credit is a short-term loan meant to help with liquidity requirements. Formal lines of credit are offered after evaluating your business's assets, cash flow, and profits. But a lot of times, people also use credit cards to fund their business's cash requirements, making them informal lines of credit. However, both channels accomplish the same task of keeping your business cash-rich, allowing it to meet its financial obligations.
2. Minimising expenses
Expenses are an inevitable part of every new business. Even if your business is services-focused, you may still need to pay for online portals, employee emails, and cloud storage. Minimising expenses requires you to be frugal. It requires you to prioritise the necessary expenses to create fiscal space, allowing you to delay other ones. Keeping expenses low at the start ensures that you don't eat into your limited cash reserves.
3. Choosing an adequate business structure
A sole proprietorship comes with pros and cons, but so does a partnership and a limited company. The idea is to understand how each structure impacts your liability, tax filing requirements, and growth opportunities. A sole proprietorship can be a great route if you want access to your business's funds all the time, but it exposes you to additional risk by merging your business's liability with yours. A company restricts you from freely accessing funds, but it also separates your liability and keeps it limited to your ownership in the company.
4. Paying yourself first
Your business thrives because of your hard work and dedication, making it natural for you to expect rewards. Paying yourself first enables you to enjoy the financial rewards of successfully running a business. However, paying yourself first does not mean doing it at the expense of your business. It goes at the heart of your business's structure by requiring you to think about yourself before making important financial decisions.
One example is clients. You can create a workbook to determine if the new client you are bringing on will create enough of a payday for you after all expenses have been paid for. Another example is office space. Do you really need that fancy new office overlooking Hyde Park? Sure, the view might be nice, but we are sure you would much rather make sound financial choices that set you up for success long term.
Starting a company requires giving each of these elements due thought and care. Proper planning and rigorous monitoring will help you stay vigilant so that your business can survive the initial stages of its life.
Lawrence Grant experts can assist you with the legal requirements of starting your own business. Our business start-ups team can get in touch with you at a moment's notice when you are ready to get started.
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