Guest blog post by Victoria Green.
One of the first rules of becoming an entrepreneur is that you should keep your business and personal finances separate. Yet this does not mean that you can simply forget about your personal accounts; aside from the fact that they’re still important for day-to-day living expenses, they can also impact your business’ chance of success.
This might seem counter-intuitive. After all, you’re keeping these accounts separate, aren’t you? However, there are a few key factors to consider, no matter where you are in your business development process. The points below aim to explain just why your personal finances still matter, and what you can do to incorporate these elements into your business.
Recommended reading: 9 Tips To Help You Budget Better
Giving the Right Impression
Whether you’re launching a brand new business, or seeking to grow an existing one, success comes at a price. In addition to your time, energy, and dedication, you will need to make some level of financial investment.
Of course, it is possible to start an online business on a shoestring budget, particularly if you are looking at something like dropshipping. However, that doesn’t mean you shouldn’t explore your options and secure financial backing if possible.
The thing is, whether you are petitioning for startup capital, applying for a business loan, or simply trying to project a professional image, the state of your personal finances can be extremely important.
After all, with no business finances to refer to, your potential investors or lenders will need to be convinced that you are capable of handling the money responsibly. The more organized and well-maintained your personal accounts are, the greater your chances of securing the funding you require.
Furthermore, your financial situation can also impact the impression your customers have of you, and the extent to which they are willing to trust your brand. As such, having a reputation for reliability and good service is even more essential than it might seem.
Learning the Ropes
When you’re new to accounting, it can all seem a bit overwhelming. You need to stay on top of your paperwork, keep track of receipts, and digital transactions, and learn how to balance your income and outgoings. Fortunately, managing business finances is not all that different from managing your personal accounts, and many of the skills you have learned in one with carry over to the other.
As such, keeping your personal finances in order can teach you the bulk of skills you will need for the management of your business accounts. This means that by the time you come to publicizing your business finances, you will already know exactly what to do.
Preparing for the Worst
Even with total dedication, a fantastic startup idea, and a carefully-laid plan, things can still go awry, and your finances are not always protected. Fortunately, a great business strategy includes a contingency for when something doesn’t quite go according to plan.
This brings us back to the importance of having organized your accounts before embarking on your journey as a digital business owner. Not only will this make them more manageable in the future, but it also means that if the worst should happen, and your business begins to struggle, you will have some savings to fall back on while you get things straightened out.
Your business budget should already include a contingency element, in case of emergency. However, a strong personal finance situation means you can act as a final fallback in the event that things don’t go according to plan.
Getting your online business off the ground can be hard work, especially in the early days when you’re working to a tight budget, and trying to grow as rapidly as possible. In fact, one of the best ways to fuel early growth is to be prepared to reinvest as much of your revenue possible into your business.
Making the right investments into a well thought out marketing strategy, an easy to use store builder, and the right staff are just some of things that can help you build up a head start. However, while this will help to get your business off the ground more quickly, this may mean taking little to no salary yourself for the first few months, so it is easy to see why having your personal finances in order can be of benefit here.
Having a sense of your living expenses and other outgoings, along with a clear idea of the state of your personal accounts, you can quickly determine how much of your revenue you can afford to reinvest.
While this may mean living a little more frugally for a time, the initial boost it can provide to your business is more than worth it. Plus, you will be so dedicated to helping your business succeed, you may not even notice that you have had to tighten your purse strings.
A Final Word
Aside from all of this, it’s also a great idea to get your personal finances straight before you set up a business simply because you will have far less time to do so later. Making sure your books are in order not only enables you to say with confidence that you can handle that aspect of your financial strategy, but also means you can go into business with one less worry on your mind.
It is not the most exciting task, and can be a burdensome one, especially if you’ve let things slide for a while. However, once you’re back on top of things, you will be in a far healthier position to give your business the attention it deserves. Plus, it’s always worth remembering that you don’t have to go it alone. You can always consult a professional for advice and assistance with both your personal and business accounts, if you’re not confident in your ability to handle these matters yourself.
Victoria Greene is a branding consultant and freelance writer. On her blog, VictoriaEcommerce, you’ll find articles covering marketing, social media, and how to manage the financial side of your business.