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My first business was a hard lesson in fundamental finances. I was in college at the time, working as both a freelance tutor and writer to help make ends meet. I use the term “business” loosely here, but I was indeed in business for myself. I had legitimate services to offer, I had clients sign contracts, I was making (some) money. But those experiences in college definitely taught me a thing or two about what it takes to run a successful business. Whatever money I made from writing gigs or from teaching English to students was meant to go into expenses that would help grow my business. The problem was that I couldn’t figure out what I needed to do to grow my business. I’ve been out of college for a while now, and I work full time as a freelance writer and blogger. Going into business for myself has made me very aware of the financial pitfalls that lurk around every corner when you’re running your own outfit, particularly if you have little experience in business. Allow me to offer some useful tidbits to enterprising youths who want to start a business for themselves.
Draft a short-term and a long-term financial plan Budgeting is a difficult skill to master, but it’s something that every entrepreneur needs to get down if they want to succeed. It might sound easy to draft a budget: you put your projected expenses in one column, projected revenue in another, and then figure out how to stay in the black. How hard could it be? Budgeting is more than just dreaming up figures that you hope you’ll meet in the future. It’s about assessing the financial resources you have on hand and making a judgment call about how those resources will help grow your business, both in the short and the long term. The size of your budget depends on the nature of your business—a start up company with 20 employees working out of a warehouse space will require a much bigger budget than a one-man company run entirely online. You need to take a realistic look at how much it costs to get your business up and running, and how long it could be before you start to make a profit.
Tighten your belt and make safe investments
Now is not the time to buy a new car, or to go on that European vacation. When you start a business, you have to commit to it wholly. Your time and your money should be devoted to getting your business off the ground, which means little to zero luxury spending. The money you spend on drinks and eating out could do much more good if it’s invested in your business’ future. This initial phase might be hard on you, forcing you to live a more modest life than you’re accustomed to, but it will be worth your efforts if you run your business well. The only investments you should make outside of your company are ones in safe and secure enterprises. Government stocks and bonds, CDs, a savings account—these are all safe venues for putting away some capital for a rainy day. Needless to say, day trading and playing the stock market isn’t such a good idea right now.
Spend only on business strategies that will payoff
Sometimes it’s hard to tell what investments matter more than others. You want to improve all aspects of your business, but you only have so much capital to throw around. For my money, I say that you invest in things that involve how potential customers interact with your business. Web site design, web marketing campaigns, product integrity—anything that makes your business and its services/products look better is a worthy investment. A snazzy website or an updated version of your product might the different in the way that customers perceive your company. If anything will yield a payoff for your business, it’s the investment that you make in its image.
Karen Smith is a freelance writer and business blogger whose primary goal is to inform her readers about pursuing a business degree online. She also enjoys writing about small business trends, Internet marketing, personal development, and sustainable living. Karen welcomes your comments below!