For many people, entrepreneurship can be the ticket to a meaningful career. But it’s crucial to take certain steps to prepare yourself financially for starting a new business. If you don’t, it could make it challenging to achieve your business goals.
If you’re thinking about starting your own business, here are some steps to take before you begin the process.
1. Create a Budget
Budgeting is one of the most foundational things you can do to establish a sound financial plan. It will also help you keep track of your expenses, so you can build your business without worrying about your personal funds.
Use Budgeting and Card Management Apps
Especially if you have a few employees using company debit cards, you may want to consider using free apps like CardValet to monitor company spending. SouthEast Bank supports CardValet to help entrepreneurs keep their business spending and savings goals on track.
With CardValet, not only can you set maximum purchase limits on individual cards, but you can also limit the geographical areas and merchant types where your cards can be used. Also, the card management app enables you to turn cards on and off instantly. If an employee loses or forgets to turn their card in after leaving the company, you can simply deactivate it.
2. Build Up Your Savings
Entrepreneurs know that it can take time to become profitable when starting a business. While it may be unrealistic to save several years’ worth of living expenses, it’s a good idea to save some money to cover personal necessities while you focus on your startup.
Even if you’re just starting out with a side business while you work your day job, if your intent is to transition to running your business full-time, now is the best time to start saving so you can be ready when the time is right.
3. Read Up on Taxes
Small business taxes are different than personal taxes in many ways. For example, because you’re not a W-2 employee with taxes withheld from every paycheck, you may need to make estimated tax payments every quarter instead.
Also, small business owners often have to pay a self-employment tax, but may also benefit from other tax provisions, such as the qualified business income deduction and deductible business expenses.
If you don’t already work with a professional tax preparer, you may choose to consult with one for an idea of what you can expect as you start and run your business.
4. Do Some Forecasting
It can take time to get a business off the ground, but depending on the situation, you may be able to reasonably forecast how long that will take.
As you develop a business plan, run some projections for when you’ll start selling your product or service and how much revenue and expenses you anticipate over the first few years.
This process can be difficult, especially if you don’t have experience with it. But it’s an important step that can help you determine how much money you need to have to cover personal expenses while you build.
5. Separate Your Business and Personal Expenses
One major mistake that many new business owners make is not separating their business and personal expenses. If you’re a sole proprietor, for instance, you may not think it’s necessary to open a separate business bank account.
But separating your personal and company expenses can be a significant help when it comes to accounting. It also simplifies your taxes, as it can help you determine which expenses were for your business — and are therefore deductible — and which ones aren’t.
Choosing the Right Business Bank Account
When you’re choosing a business bank account, be sure to select one that’s right for your company’s size. SouthEast Bank offers several business checking accounts designed especially with small- to mid-sized businesses in mind.
You may also want to open a business savings account, which can keep your funds safe and secure. It’s even better if your bank offers digital banking options so you can check account balances, transfer funds and more while on the go.
6. Build a Relationship With a Trustworthy Lender
As your business grows, so will your financial needs. It’s a good idea to develop a relationship with a trustworthy lender that can help you achieve your business goals.
Research banks in your area that offer a wide range of commercial financing options. You can even reach out to connect with a commercial lending officer. That way, when it’s time to apply for financing, you’ve already established a relationship with a lender that knows your business.
SouthEast Bank offers a variety of commercial financing options, including commercial real estate, equipment financing and more. Visit our website for details.
The Bottom Line
Starting a business can be an exciting experience, but it’s important to do your due diligence before you begin the process. A significant part of your responsibility is making sure your personal finances are in good shape so you can devote more time and resources to your business.
Continue making smart money moves with your business goals in mind, and you’ll set yourself up for a stronger financial future.
Note: Links to other websites or references to services or applications are provided as a convenience only. A link does not imply SouthEast Bank’s sponsorship or approval of any other site, service or application. SouthEast Bank does not control the content of these sites, services or applications.
Information contained in this blog is for educational and informational purposes only. Nothing contained in this blog should be construed as legal or tax advice. An attorney or tax advisor should be consulted for advice on specific issues.