What are the 7 key financial areas that you should consider before you start a business? Here's my suggestions:
1. Identifying your start-up costs
When you decide to start up a business, you need to make sure that you have sufficient money to:
- purchase the relevant equipment;
- cover the initial start-up costs;
- pay the running costs of the business;
- and pay your basic living monthly expenses.
Once you are able to cover the costs listed above, then you are in a good position to start.
2. Personal Survival Budget (PSB):
This is where you have to calculate all of your personal out-goings (all of your bills and expenses) against your income, so that you can identify the difference.
3. Separate business bank account:
The best way to keep track of your finances for your business is to have a separate business bank account. Although this is not compulsory, it will make things easier if you want to know exactly how much income and expenditure the business has incurred, also this will help when calculating your end of year accounts.
Every business owner must be clear on the pricing strategy for their business. Your strategy should include how much you want to sell your products and services for and also take into account all the business expenses, along with your Personal Survival Budget.
5. Breakeven analysis:
This is at the position where you have covered all of your costs. Anything over and above this is classed as a profit to the business. To ensure that this is calculated correctly, you will need to identify your fixed and variable costs.
6. Sale forecast:
This is where you breakdown the total sales per month into products or services.
7. Complete a cash-flow forecast:
This document outlines the projected income and expenditure for your business usually over a period of 12 months.
Once you have gained a clearer understanding of the 7 financial areas outlined, you will be in the better position to start putting your business plan together.
Evidently, it's easier to inspire a new model for business than a new model for society.