Launching a business brings a thrilling experience, but when it comes to managing finances, it can be quite overwhelming, particularly for new entrepreneurs. To assist in overcoming these challenges, we consulted experienced founders and CEOs to gather their top budgeting strategies. From investing smartly and practicing patience to extending your personal financial runway, these professionals provide six actionable insights that will empower you to make wiser financial choices and position your business for enduring success.
- Smart Investment and Patience are Key
- Strategically Forecast Cash Flow
- Simplify Your Budget while Connecting to Objectives
- Make Personal Savings a Priority
- Monitor Finances and Emphasize Essentials
- Extend Your Financial Runway
Smart Investment and Patience are Key
As someone who has reached eight-figure success, my key advice is this: Never invest more than you can afford to lose. This approach ensures that you can bounce back if your first attempts do not turn out as planned.
Nonetheless, launching a successful business requires a significant upfront investment, and in the beginning, you might not see immediate outcomes from your labor.
There were years when I doubted my potential for success. It’s important to keep in mind that achieving success often takes time. I launched a business that failed about a decade prior to my breakthrough, where I saw six figures in just four months, seemingly achieving “overnight” success. So, while it’s crucial not to overextend your investments, don’t be disheartened if your success comes later than expected. Continue learning from your errors and honing your abilities.
Luisa Zhou, Founder, LuisaZhou.com
Strategically Forecast Cash Flow
If you are an entrepreneur just beginning, operating on a tight budget, remember this tip: track less of where your money has been and focus more on where it is going. It’s vital to know your past expenditures, but equally important is to understand current cash flow.
Create a cash-flow forecast for the next six months at minimum. This is not solely to plan out spending right away, but rather to identify trends in cash inflows and outflows, which aids in your decision-making process regarding scaling, hiring, or investing in new technologies.
This forward-thinking method enables you to prepare for financial requirements before they become critical, helping you avoid severe cash-flow problems that challenge many startups. Knowing you have a significant expense coming up in a few months allows you to adjust your savings or consider credit options in advance.
By adopting this mindset, you will think more strategically about the future instead of focusing solely on upcoming weeks. Effective forecasting demands you plan for longer-term needs, seeking avenues for growth and sustainability rather than merely finding ways to stay afloat.
Eric Croak, CFP, President, Croak Capital
Simplify Your Budget while Connecting to Objectives
In my role as a Financial Coach for emerging professionals and entrepreneurs, I have encountered numerous individuals sharing their budgeting experiences. I’ve found that budgeting often collapses for two primary reasons: either the budget is too complex to maintain, or it doesn’t align clearly with their objectives.
A budget without simplicity and a user-friendly automated tool tends to feel burdensome, causing people to shy away from it. If there isn’t a clear inclination towards your objectives, it’s hard to muster the motivation to engage with it initially. Emotional engagement is key! However, if you can excel in these two areas, your likelihood of succeeding increases significantly!
Jake Randall, Founder, Wild Freedom Financial Coaching
Make Personal Savings a Priority
My consistent guidance to new entrepreneurs is to take care of your own finances first—put aside a percentage of your income for personal savings and investments before directing funds toward your business. This strategy secures your financial well-being while you work on your venture and can significantly impact long-term success.
Adam Garcia, Founder, The Stock Dork
Monitor Finances and Emphasize Essentials
In my previous role as a financial advisor and my current position as General Counsel, I recommend that new entrepreneurs closely monitor their revenues and expenses as the most vital budgeting strategy. Unexpected costs can threaten startups, hence comprehensive record-keeping is essential for informed financial decision-making. Moreover, differentiating between “must-haves” and “nice-to-haves” is crucial, as prioritizing essential expenses over discretionary ones can greatly diminish overspending.
A practical example is opting for open-source software rather than costly, license-based solutions for non-critical operations. Finally, ensure you have a clear strategy for generating sales and revenue; focusing on revenue creation should take precedence over product development, as the funds generated will support the latter. Remember, it’s about diligent planning and waiting for the right moment.
Jonathan Feniak, General Counsel, LLC Attorney
Extend Your Financial Runway
Establishing a business resembles a construction endeavor; it often takes longer and costs more than you anticipate. Therefore, aim to give yourself the largest possible financial runway when initiating your business.
For instance, if your business plan outlines a six-month timeline for profitability, consider setting aside personal finances for nine to twelve months. For those earning a higher income, this may involve saving several months’ worth of expenses, while others might need to relocate to a more affordable living situation or stay with family. Additionally, retaining your full-time job until your business generates adequate income to support yourself can also be a wise approach.
No matter the strategy, seek a means to grant yourself the most time possible so that you’re not burdened with personal financial worries while launching your business. If relying on your parents’ or partner’s health insurance isn’t feasible, explore options for more affordable coverage through unions and associations.
Kerrie Carden, Founder & CEO, Equip Advisory
