While there are many young entrepreneurs out there taking matters into their own hands and successfully starting up their own businesses, there are others that aren’t sure where to start and often make silly mistakes that can be easily avoided. Money, in particular, is one of the biggest hurdles for entrepreneurs and if you don’t know how to manage your business’s funds properly, you could quite easily find yourself back at square one.

So, if you are starting up your own business, here are a few financial questions that you will need to ask yourself first to ensure that your business starts out with the best chance of growth.

Business financial calculation

Question #1: How long will it take before your business funds itself?

Not many entrepreneurs realise how long it can take for a business to be self-sustaining.

The costs of starting a business aren’t only in getting it ready and building your first product or service. It may take months or even years before you manage to pull in enough income to balance your outcome. In which case, you need to make sure that you have enough money to sustain yourself and your business as well as minimise the amount of debt that you incur. While short term loans can pad your personal funds, you need to plan ahead carefully when starting up your business and make sure that you have enough of your initial funds to get you through the first few months of work without racking up debts.

Question #2: Where is your money and where is your business’ money?

For obvious reasons, you should try to keep your money separate from your business’ money and your debts should stay separate from your business’s debts. When you mix your personal funds with your business’s funds you open yourself up to a lot of confusion and you will never really be sure how much you have to spend or how much your business is worth.

As soon as you register your business, you should open a business bank account to ensure that your personal information is not mixed with that of your business and that the money that you can spend on yourself is kept separate from the money you will be spending on your business.

Question #3: How big can you afford your business to be?

As great as it might be to imagine yourself running your own office with a whole family of employees available to help you build your business, that might not be your first experience of running a business according to what your budget will allow. Think carefully about the size your business will be to start and where you might be able to cut costs if you are short on funds.

To save money, many entrepreneurs start their business completely online, which is something that you might think about if you can’t afford to rent a space to work – at least until you start bringing in stable income. By starting your business online, you can save money on having to rent and stock an office and you can use the internet to reach further for useful talent who can help you build your business.

Cost analysis

Question #4: What costs are necessary and which can you cut down?

If you have a small budget, you’re going to need to cut back on costs here and there to ensure that you can meet the demands of your customers while keeping up with your bills.

While working on your business’s budget, decide for yourself which costs you can’t compromise on and which you might be able to shrink down. For example, you shouldn’t compromise on the quality of the products or services that you sell to your customers if you want your business to grow, so you shouldn’t cut costs that may negatively affect the final product that you give to your customers. However, you might be able to cut costs by turning to social media for your advertising and getting rid of paper and printed documents and going fully digital.

Little costs can make a big difference over time and knowing where you have some leeway can help you make decisions when money is tight, so look carefully at your budget and work out what to invest in and what to cut down.