Council Post: Eight Essential Financial Tips To Keep Your Business Going Past Year One

In all the excitement of opening a business and launching that first product or service, it can be easy for aspiring entrepreneurs to forgo a thorough audit of their finances in favor of speed to market. However, it’s absolutely crucial for business owners to keep a close eye on their income and expenses—especially if they want to ensure their survival past year one.

Making such financial mistakes early on can be detrimental, but it doesn’t mean early-stage entrepreneurs can’t turn it around for the better. To help your business survive its first year in operation, eight members of Young Entrepreneur Council shared some important financial tips every new business owner should follow.

1. Track Your Cash Burn Rate

No matter how much funding money you have raised, make sure you know how long you can go with the money you have and then adjust the belt to make sure you are spending your money uniquely on “musts.” Do not spend money just because you have it. Get a smaller and more modest office if possible, hire teammates and invest in marketing strategically, buy only necessary assets, etc. Only by spending your funding strategically will you be able to eventually generate positive cash flow. – Riccardo Conte, Virtus Flow

2. Keep An Emergency Fund

My financial advice for new business owners is this: Always put a little bit of money aside in case an emergency pops up. Despite your best efforts, you will run into unforeseen costs or business emergencies. Instead of panicking, you can quickly address these issues and get back to growing your brand. – John Turner, SeedProd LLC

3. Focus On ‘Minimum Viable Cash Flow’

Focus on what I call “minimum viable cash flow.” There are two parts. On the revenue side, what can you receive cash for earlier? Can people pre-order, can you deliver later, can you have your cost of goods sold due after cash from revenue comes in? Lots of entrepreneurs are afraid to put a price on their new idea. You may offer a discount, but don’t discount it to zero! The other side is the expense. Here, evaluate how long you can go without cash coming in (usually to pay your salary). Have this time frame in mind and know what cash flow number makes you comfortable to continue putting in the time. Then, build your plans to meet that minimum viable cash flow. – JT Allen, myFootpath LLC

4. Minimize Your Customer Acquisition Cost

In the early days of a business, focusing on minimizing customer acquisition costs (CAC) is crucial, with free acquisition being the benchmark to work toward. In order to scale in a capital-efficient manner, CAC is a metric that simply can’t be pushed to the back burner. It can be easy to get lost in the vanity metrics that suggest a company is growing in a sustainable way, like sales revenue increases or customer enrollment rates going up. However, these vanity metrics are only smoke and mirrors; how much it costs to generate a sale is far more important. – Richard Fong, PageKits.com

5. Focus On Your Core Business Plan

It is tempting to want to “go big or go home” when you are first starting a business, and many people are focused on short-term profits rather than long-term success. So the best advice for new businesses is to run a tight ship when it comes to your finances. Do not overextend yourself with loans for “new ideas” that go beyond your initial business plan because you think it will make you richer faster. Instead, reinvest your profits back into the business to stimulate growth. Stick to your core business plan and focus on making that a reality before you take on any additional expansion goals for the business. Remember that at the beginning you are learning and adapting, and your main focus is to create a solid and sustainable business for long-term growth and success. – Maria Thimothy, OneIMS

6. Create A Budget And Stick To It

Although it’s very easy to use credit cards to finance your business expenses, don’t be tempted to spend more money than you have available to you during the first year. Creating a budget and being smart and strategic with your resources will ensure that you don’t overspend and accrue debt or interest. – Kristin Kimberly Marquet, Marquet Media, LLC

7. Get Professional Financial Guidance

During the early stages of a business, money is tight. Everything needs to be on point if you want to reach profitability and, eventually, success in your industry. My advice is this: If you need to hire a financial consultant, do it. I’ve had many friends think that they could get away with doing all of the financial stuff themselves, and they ended up needing to hire someone. You may have to pay a little extra to get professional help with this part of your business, but you’ll save money in the long run and you’ll also have an accurate budget, which makes planning for the future easier and more manageable. – John Brackett, Smash Balloon LLC

8. Create A Cash Flow Projection

When it comes to financial matters during the early stages of a business, it’s critical to create a cash flow projection. A cash flow projection is based on payments you expect to get in the future and expenses you’ll face. Cash flow projections help you make smarter decisions as a business leader. You’ll have a good idea of when you can expect to run out of money. This will help you understand what kind of sales goals to set up and the level your expenses should stay at. You’ll also know what rate of return you should get on your investments, which will help you pick them more carefully. Once you have a cash flow projection in place, you’ll have a guideline that impacts almost every financial decision you make. So, make sure to create one for your business at the start. – Blair Williams, MemberPress