Budgeting Tips Every Entrepreneur Must Know

Budgeting Tips Every Entrepreneur Must Know

Creating and maintaining a budget is an essential skill every entrepreneur must learn. The budget is an integral part of business management and a way to manage finances. With a good budget, your business runs smoothly, cash flow is managed, bills and salaries are paid, and operational costs are handled efficiently. Use these tips to take control of your finances and improve your budgeting skills.

Keep Business and Personal Finances Separate.

Mixing business and personal finances is a common mistake among entrepreneurs. Funneling money and credit to your business from your personal account and vice versa is often tempting, particularly at times when you want to maintain a good cash flow. However, this will have negative consequences to your finances, both business and personal. By keeping them separate, you can prepare a straightforward budget and a clearer, more accurate estimate of your sales, losses and profits.

Learn to Prioritize Expenses.

Running a business can be exciting and your enthusiasm can make it easy to lose touch with your budget. Avoid overspending by carefully assessing what you are about to spend for and how that expense will help/impact your business later. Only if an expense can help improve your processes, bring in more assets or increase your profits should you consider it.

Keep a Record.

Create a system for keeping your documents for easy reference later. Business receipts in particular should be recorded and stored regardless of the amount. If necessary, make photocopies of important papers and keep them in a separate file. These, along with invoices and receipts will give you a better understanding about how your business is doing and help you create an effective working budget.

Prepare for Taxes.

Do not underestimate how taxes can affect your budget, so set aside money (preferably cash) in your budget to pay for taxes. It is a good idea to plan ahead and set aside cash from your revenue for this purpose. Having enough put aside for taxes will save you the unpleasant surprise that come with tax expenses you are unprepared for, the expense of late fees and the inconvenience of an audit.

Keep a Cash Reserve.

As an entrepreneur, you can expect your income to fluctuate. You may earn more on some days or you may even run your business at a loss initially. To prepare for surprises, always put aside at least 5% of your income to pay for any unforeseen expenses that might occur.

Note Your Expendables.

As with all business-related expenses, there are some things that you can do without in case business is not doing so well or if you need to spend for something important. Know which expenses these are so you can remove them from the expense budget without hurting your business operations.

Consider Allowances in Your Budget.

When you prepare a budget, set up a reasonable allowance for unexpected expenses. This will help ensure that you put aside more money than what you might need. In case of changes such as price increases, miscalculations or an expensive but necessary purchase, you will have enough to cover for the expense.

Review Your Budget.

Perform a monthly review of your budget to determine where you are at the moment. Over time, you will be able to see a pattern of spending and identify areas of improvement. Comparing the budget forecast with the actual expenses can help you determine which steps to take to increase your profit and improve your operations. Over time, you may have to work with a professional bookkeeper for this but having the capability to review and understand your budget will help you create better, more effective strategies for the success of your business.

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When Should Entrepreneurs Quit Their Day Job?

When Should Entrepreneurs Quit Their Day Job?

Many people are beginning to move into entrepreneurship alongside their professional jobs. While it is safe to jump into starting a business while keeping your job, such an arrangement may not provide you with a potential for greater success. If you have identified an idea or you want to scale up the one you already have, you might be thinking of quitting your job to concentrate on realizing your dream as an entrepreneur.

Many people have rushed into quitting their jobs only to find that their businesses aren’t as successful as they thought it would become. Therefore, the question many people would ask is, “When Should an Entrepreneur Quit Their Day Job? To answer this question, make sure to take into account the following:

Ascertain that your Idea is Viable

While millions of business ideas are born on a day-to-day basis, not all of them are the best or viable. If you have performed your analysis and you are sure that the idea is sustainable and can stand test of the moment, then you can go ahead and quit your job. You could be having a the best idea that promises to solve a need in the market but it may not live longer if the market isn’t ready for it. The trick is to perform a market research to establish the viability of the idea while considering the potential competition on the market.

Ready Yourself for the realities of the Business World

Entrepreneurship has been dressed up nicely as a glamorous path to success, and it is at times and not always. You become your own boss and decide what to do. While there are tech-startups such as Facebook and Uber that have succeeded, there is a general misconception that an entrepreneur can start up a business and the next day he becomes a millionaire. This is not always true. Most ideas conceived die or never become successful and most entrepreneurs end up to their formal jobs again. The truth is that many people who have succeeded have had to travel on the road of challenges sometimes failing times before finding the right bearing to success. Therefore, if you are ready for the realities such as failure and competition that may stall your success, then you can go ahead and quit your job to face the real business world.

Establish a Strong Financial Plan

Quitting your current job would mean forfeiting your sure source of income. Therefore, you need to have an excellent financial plan before you quit. You don’t have to quit a job only to begin borrowing to fund your subsistence and that of your family. Even though you think that your idea is so incredible that it will begin to churn out great returns, this might take time before you can begin to see this happen. Look at your savings to see if they can sustain your current lifestyle for a year or so before quitting. What other fallback options to you have just in case your business doesn’t pick up as quickly as you would have thought or in case you run out of money? Considering these questions might just help you know when to quit the nine-to-five job for entrepreneurship.

Don’t Ignore Talking to people.

Ultimately, the decision to quit your job is personal, but before you quit, ensure to talk to other people that you consider helpful or experienced. You could find alternative options on how to go about the whole idea. Your mentors and spouse might be the best people to help you look at the idea with a second mind. Is your spouse willing to accept the challenges and risks you are about to take? This way, you will be able to get advice on some of the issues that may have missed your minds. In addition, it will help you take corrective measures before plunging into the challenging waters of entrepreneurship.

Maintain the bridge

Ensure that you have exemplary relations with your current employer. The last thing any person can do is to quit the wrong way. You might want to come back if your idea just doesn’t work out. Never burn the bridges that helped you climb your way to where you are now. Consider discussing with your employer about your plan to leave. Ensure that they have found the best replacement before you exit.

Once you have checked on all the above issues and you feel are sure about each of them and are set to leave to become a full-time entrepreneur, you can go ahead. While taking risks and making huge decisions are part of entrepreneurship, extra caution and a lot of preparation is needed to prevent or minimize the challenges that might come your way.

The E-Myth Revisited: A Book Review

The E-Myth Revisited: A Book Review

The E-Myth Revisited, by Michael E. Gerber, is a book that focuses on why so many small businesses fail to attain their goals. And to express his thoughts and opinions or deliver the message, the author incorporates several fictional business owner characters. The narrative also makes significant references to systems at the workplace, and how they dehumanize or not dehumanize the employee.

Major Takeaways from The E-Myth Revisited

The E-Myth Revisited has a lot of uplifting words and suggestions for budding entrepreneurs to excel in their respective ventures. The advice doled out isn’t specific to a particular product/service or industry, but is generic that could apply to a range of businesses. The following are some of the primary things we learned or were forced to ponder over after having done reading the book:

• The author clearly explains why most businesses fail. One of the reasons being most individuals start businesses to be their own boss or make profits. Only the minority sees a business venture as an opportunity to work for and under themselves. And to be an efficient employee of your own business, one has to learn the technical skills needed to excel at the vocation.

• An individual cannot don all business hats. For a business to sustain or your interest to stay intact, it’s important to delegate work and not put a one man show. Most small businesses, to survive and succeed, need three people: a manager, technician and entrepreneur. And a person will get exhausted by the end of the working day or kill his motivation and passion for the business if he tries to be all the three.

• A business must have a system or process to itself that can be replicated. The business owner’s efficiency and profits tend to be higher if he can systematize proceedings. This makes it easier to train people and make them do the expected. Most small business owners fail at this aspect. They don’t have a system in place, and those who do have one have a system that may get dated with time or isn’t designed keeping in mind the prospects of the business becoming bigger in the future.

• To succeed, a business not just needs an excellent idea but the owner should also be qualified to know how to run a business. Your business schools may help you learn business skills in a scattered manner, but this book makes you more eligible to start and run a business.

Areas Where the Book Falls Short

This book by Michael E. Gerber may be quite popular and have its dedicated fan base, but this doesn’t mean the book is without its flaws. For starters, quite a few people have complained about the narrative being stretched out to last more than 250 pages, which could have been easily skimmed down to below 100 pages.

Also, some critics have indicated that the author, in order to validate his point, invents new characters during several stages of the prose. This approach was not just repetitive but was also annoying to a certain extent. And not to mention the ad placements for his own company within the text.

Conclusion

Overall, it’s a great book for people who’d like to start their own business or individuals who are already heading a business but would be better off learning a few essential tips and tricks. However, as aforementioned, the book is a bit too long and it could be hard to finish this book if you’re not an avid reader. Fortunately, the book is also available as CDs, which you can hear to. But since most people read books and not listen to them, we felt this point had to be highlighted.

5 Helpful Tips For Every Entrepreneur

5 Helpful Tips For Every Entrepreneur

You will likely need employees that can help you turn your business vision and plan into reality. As such, you should hire people with the relevant skills and education qualifications. Moreover, candidates for senior positions should have a reasonable level of work experience. For instance, most businesses require chief operating officers (COOs) to have an MBA because it equips one with the skills required to run an organization professionally.

Nevertheless, some companies prefer experience rather than educational qualifications when hiring staff to fill certain positions. A good example is Facebook, which hired George Hotz alias geohot in 2011 – an American hacker renowned for unlocking the iPhone – because he has unique IT skills that few people in the IT community possess.

Organization

You should be well versed in organizational management best practices including data driven decision making and six sigma principles. The beauty of these practices is they have been market-tested by both big and small businesses and proven to work. In addition, they enable businesses to reduce wastage of resources, enhance supply chain cycles, and improve business-consumer relationships. At the same time, you should keep abreast of new developments related to such practices and implement them where necessary.

Marketing

When developing marketing strategies, you must consider your target audience, message, marketing timeline, marketing channels, and marketing message format. For instance, most businesses develop marketing strategies that include a social media angle because social networking sites including Facebook, Twitter, and LinkedIn attract more than a billion visitors every day. What’s more, marketing on these sites is cheaper compared to advertising on traditional platforms such as TV, newspapers and radio.

Budget & Tracking

Lack of proper financial planning is one of the leading causes of business failure according to the US Small Business Administration (SBA). As such, it is wise to follow acceptable budgeting practices such as separating business and personal finances. At the same time, track and keep records of all financial transactions to make preparation of tax returns easier and error free.

Conclusion

Entrepreneurs typically face numerous challenges when starting and running businesses. Luckily, you can make this process much easier by turning your entrepreneurship vision into a detailed plan, building the “Right” team, adopting solid organizational management best practices, developing well thought-out marketing strategies, as well as following acceptable financial budgeting and tracking principles.