Personal finance for small business owners is a topic everyone who wants to succeed in business should give close attention to.
Because this is learning curve for me as well, I bring to you 10 personal finance tips from leading experts across the world to help every small business owner succeed in this new year.
1. Diversify Your Sources of Income.
Diversify your sources of income by placing funds in a side business that generates steady cash flow even if it is small, alternate investments or just set some cash aside for lean income months.
This provides balance during the period you do not earn much but have very important personal bills or business expenses to settle.
2. Live 6 Months Ahead.
This means you should calculate critical expenses to cover housing, utilities, insurance, and food for at least 6 months down the line.
This is very important when your income is still very irregular or when you are trying to scale your business. With budget for 6 months ahead set aside, you can focus on building your dreams without distractions.
3. Separate Business Funds from Personal Funds.
Separating business funds from personal funds will not only give your business more credibility and a sense of legitimacy but also help reduce your personal liability during financial mishaps in business.
This will also help you get organized with paying your taxes accurately and as at when due.
4. ALWAYS Keep Expense below Income.
Parkinson’s law has proven that people’s taste naturally rises alongside increase in their earnings.
As a budding business owner whose income rises and falls over time, you need to cap your expenses to ensure you do not spend more than you earn at any point in time.
5. Hire Good, Not Cheap.
Hire the best people, not the cheapest. If someone is willing to work for free, say no. Get on your team people who will be fully devoted to your course, not those who will treat it as a passing hobby.
You get what you pay for. Always remember!
6. Protect Your Most Valuable Asset.
Your well being and ability makes your most valuable asset, insure it.
Health insurance against accident or eventualities and life assurance to protect dependants who live on your income won’t be a bad idea. Get insured!
7. Save for Retirement.
Whether you are a young business owner or you are in your 50’s, it is never too early or late to save for when you no longer in active service.
Business owners have different options for saving for retirement. Check with reputable pension fund managers for suitable pension contributory or retirement savings account.
8. Establish Money Date Rituals.
Money date is periodic time alone in a public place when you review your accounts, create reports, and update your financial goals. This can be refreshing if you do it consistently.
Money date can make paying quarterly taxes, creating monthly reports, reviewing employees’ performances and feedback a lot more fun as you look forward to some good time for yourself though you are still productive.
9. Hire Professional Tax Adviser.
Invest in getting professional tax advice from someone who works with small businesses and entrepreneurs. You will save a lot while you pay your taxes accurately. You will also save yourself from troubles that typical tax defaulters find themselves in.
10. Negotiate, Negotiate, Negotiate!
Regularly negotiating will save you a lot of money at the end of the year, if you get it right.
Contact your vendors, suppliers and other appropriate service providers that take the bulk of your money. Negotiate your contract terms as you compare them with new service providers who will be glad to do business with you.
Culled from Murray Newlands’ Managing Your Personal Finances as an Entrepreneur.