Business Beginner – Alright, let’s talk about something that every entrepreneur tends to overlook in the excitement of launching a new business: money. I know, I know, it’s not the most glamorous topic, but trust me, getting your finances right from the beginning can save you from major headaches later on.
When I first started my business, I had no idea what I was doing with money. I just figured if I had a great product, the sales would come and the cash would flow. Spoiler alert: that’s not how it works. And if you’re not careful, you could quickly find yourself in a mess. So, here are five key financial tips I’ve learned the hard way—things I wish I’d known when I started out.
5 Key Financial Tips Every Business Beginner Should Know
1. Track Every Dollar Coming In and Going Out
The first (and perhaps most important) tip: track your cash flow. Sounds basic, right? Well, I can tell you from personal experience, it’s easy to overlook this. When I started, I thought that as long as I had money in the bank, everything was fine. But once, I looked at my bank account and was shocked to realize that while I had some money coming in, I also had a pile of invoices and bills I hadn’t been keeping track of.
Not knowing where your money is going can be dangerous. You might end up overspending in one area while underestimating your costs in another. The only way to avoid this is by using accounting software (I recommend QuickBooks, but there are plenty out there). Track every expense, no matter how small. And don’t just track your income—track your expenses regularly so you have a full picture of your financial situation. This will help you avoid surprise costs and make better, more informed decisions for your business.
2. Separate Personal and Business Finances
I can’t tell you how many new business owners get this wrong. Trust me, I did too. In the beginning, I was just funneling money in and out of my personal account, mixing up business funds with my personal expenses. It felt like I was being “efficient,” but in reality, it was a mess.
The issue here is not just for tax purposes, but also for clarity. If you’re trying to figure out how well your business is doing, mixing your personal finances with business expenses makes it nearly impossible to tell. Plus, the IRS isn’t a fan of it either.
So, tip number two: open a separate business account and keep it separate from your personal one. Not only will this make it easier to track your business expenses, but it’ll also keep you more organized. If you’re serious about your business, you have to treat it like a separate entity. Having that financial distinction will help you stay on top of things and give you peace of mind.
3. Plan for Taxes Ahead of Time
Ugh, taxes. The word alone gives some people the chills. And let me tell you, they scared the heck out of me when I first started my business. I thought, “Oh, I’ll deal with taxes later, no big deal.” Big mistake. The first time tax season rolled around, I was hit with a hefty bill that I wasn’t prepared for.
Here’s the thing: you need to plan for taxes right from the start. The idea that taxes are just a once-a-year thing is a dangerous myth. As a business owner, you need to set aside a portion of your earnings regularly to cover those taxes. I recommend setting up a separate savings account specifically for taxes and contributing to it each month.
A good rule of thumb is to set aside 25-30% of your income for taxes. It might feel like a lot at first, but it’s better to have too much saved than too little. If you don’t, you’ll risk scrambling when tax time rolls around, and trust me, that’s no fun.
4. Build an Emergency Fund for Your Business
I don’t know about you, but I’m the kind of person who likes a safety net. When I started my business, I had a small emergency fund for my personal life—but I didn’t think about building one for my business. Guess what? That was a mistake.
Business isn’t always going to be smooth sailing. There will be slow months, unexpected expenses, and maybe even situations where you need to pivot or make an emergency repair. If you don’t have an emergency fund set aside specifically for your business, you might find yourself in a tough spot.
So, tip number four is to build an emergency fund for your business. Ideally, you want to have 3 to 6 months of operating expenses saved up. This fund will give you the peace of mind to know that if things get tough, you can still cover your overhead while you figure out how to get back on track. Trust me, it’s much less stressful to have that cushion than to be constantly wondering how you’ll make payroll or pay for supplies.
5. Know Your Profit Margin and Set Realistic Pricing
I’ve made this mistake too: I set my prices way too low when I first started out. I thought, “If I offer lower prices than my competitors, I’ll get more customers!” But what ended up happening was that I wasn’t making enough to cover my costs, and my profit margins were razor-thin. In fact, I was often running at a loss. Not a great business model, right?
Here’s the deal: you need to know your profit margins before you set your prices. Your pricing should cover your costs, leave room for profit, and still be competitive in your market. It’s a delicate balance. The way to figure this out is by calculating your costs—everything from raw materials to overhead—and determining how much profit you want to make on top of that.
Once you know your profit margin, it’ll be much easier to price your products or services correctly. You don’t want to undercharge and burn out, but you also don’t want to price yourself out of the market. Understanding your margins will help you find that sweet spot where you can be both competitive and profitable.
Wrapping Up
Managing finances as a business owner can feel overwhelming, but it doesn’t have to be. The key is to stay organized, plan ahead, and make sure you’re always aware of where your money is going. Tracking your expenses, keeping personal and business finances separate, planning for taxes, building an emergency fund, and knowing your profit margin—these are the five financial tips that every business beginner should live by.
Getting your finances in order might not be the most glamorous part of running a business, but it’s one of the most important. The sooner you get this right, the more freedom and control you’ll have over your business as it grows. And trust me, the peace of mind that comes with knowing your finances are in order? Totally worth it.
