There has been a tremendous change in the growing rate of women-owned businesses in America in recent years. According to a 2010 study by the U.S. Department of Commerce Economics and Statistics Administration, as of 2007, 7.8 million firms were owned by women, which accounted for 30% of all privately held firms.
Women are contributing significantly to the growth of our economy, and I consistently meet dynamic women who are leaving their corporate jobs to embark on their entrepreneurial journeys.
Anyone deciding to take such a momentous step deserves applause. Here are a few strategies that can put you on the right path for success along your journey:
1. Start with A Plan
Money is such a difficult topic to discuss. But, when we make the decision to address our money matters, we immediately put ourselves in a better position to succeed. When starting a business, it’s so natural for people to focus on their product or service and how they’re going to gain clients to build revenue.
While focusing on your marketing plan is necessary for your business, it is essential to start with your business plan or at the very least an executive summary, which will include your financial projections.
Your financial projections will help you to understand your cash position going into your business, and will give you realistic targets to work toward as you increase sales, which will ultimately drive your marketing and sales strategies.
Always begin by creating a plan, even if it’s only a few summary pages, and focus on your financial projects, because they can be your roadmap to success.
2. Establish Key Business Drivers
As you develop your plan to acquire more clients, pay attention to the link between activity (things that you’re doing to build revenue) and financial results (the things being done that are actually building revenue).
Build on those drivers that are producing results for your business, because smart strategizing will only help your business to move faster and allow you to see increasing profits.
3. Build Up Cash Reserves
Before you break out on your own to launch your business, build cash reserves to help carry you through the adjustment of income that you may experience.
We all hope to see our new business take off immediately, but it is more likely that it may take some time to see net revenues that match or even exceed the salary that you once had. Building out cash reserves can not only serve as your interim income while you’re increasing your revenue, but can also provide additional funds in the event of an unexpected out of pocket expense that you may experience as you grow.
If you’ve already started your business, begin putting a portion of your revenues aside to build a cash reserve that can serve the same purpose.
4. Separate Your Cashflow
More than likely, the money that you use to fund your business will be your own. It’s important to separate your accounts that you use for personal expenses from those that are for business expenses. Ensure that that all payments, credit cards, and other financial transactions are separate from your personal transactions.
Separating your cash flow will increase your opportunity to track your expenses properly for your business. If you’ve begun paying yourself, ensure that you establish a formal way of making that exchange. Set up a business account with a bank and write yourself a formal check from the bank checks created for your business.
5. Establish Business Credit
Establishing business credit is just as important and valuable to your as establishing personal credit. As with personal credit, this can build leverage as your business grows.
6. Insure Your Business
It is important to establish personal life insurance to ensure protection in the event of death or to help with unexpected life events. It’s also important to establish business insurance.
Setting up your business in certain ways, for example as an LLC may provide some separation from personal assets. However, that’s often not enough. In addition to its structure, look into what business insurance you should be setting up to cover other items like equipment, potential personal injury, and any potential liabilities that may exist as you work with clients.
7. Be Smart With Your Taxes
Taxes are important to address for our personal finances, and things are exactly the same where your business is concerned.
Secure a competent tax advisor, and if possible, bookkeeper to help you structure your business taxes in a smart way. Understand how to take advantage of all the potential deductions and deferrals for which you may qualify, and get help in learning how to track and manage your expenses.
8. Establish Long Term Investment Vehicles
While you enjoy the fruits of your labor, it’s always smart business to allocate a portion of your profits toward vehicles that will allow your money to continue growing, such as an investment account.
Planned accounts to consider as an entrepreneur include certain retirement vehicles like an Individual 401K or Keogh plan (for sole proprietors), or an SEP IRA if you have employees.
Placing your money in an investment vehicle rather than spending it or letting it sit in cash will increase your chances of growing your reserves to have sufficient funds when you’re ready to retire.
9. Succession Planning
As you continue planning the development and growth of your business, also include an exit plan for yourself. In the world of finance, succession planning helps you to start forming the behaviors around your daily tasks as you build your business.
How will the business function in your absence? Who will inherit your profits should anything happen to you? As you build on your estate, who will succeed those assets?
These are all important questions to ask yourself, so take time to speak with a professional such as an advisor or estate lawyer to help guide your plan.
10. Pay Yourself First
Last, but not least, remember to pay yourself. In fact, this is something that we should be doing first. We all know that in many situations when you start a business, it’s not possible for you to receive a formal salary. However, developing reserves and creating retirement vehicles can put you on the right path to ultimately reap the rewards of your hard work!