PLG Capital Funding Group LLC is dedicated to bringing our clients benefits anyway we can including bringing you tips from industry professionals to help your business or personal finances. Part of this weeks financial insight is brought to you from Caron Beesley who works with the SBA.gov team to promote essential government resources that help entrepreneurs and small business owners start-up, grow and succeed. Follow Caron on Twitter: @caronbeesley, please click below to read full article.
Few things in life are as exhilarating as starting a business, particularly if you are a young entrepreneur with an exciting business concept and the world at your feet! Many factors go into making a business a success, but one of the most challenging areas, particularly for young entrepreneurs is financial management.
Whether it’s securing capital, separating personal finances from business finances, or managing cash-flow, there are a number of pitfalls that lay in the way of even the most prepared entrepreneur.
Here are some tips for avoiding the most common financial mistakes that young entrepreneurs make.
1. Build a Cash Reserve
A critical decision before embarking on any business venture is having personal cash in reserves. The costs of going into business aren’t always high, but there’s a good chance that you won’t start to make a profit immediately, and you will always need to put cash aside for tax, regardless of your margins.
The following tips from SCORE offer good advice for building a six month cash reserve:
- Add up all your monthly expenses, so you know what your true personal expenses are.
- Still in a day job? Set aside five percent of your net pay each paycheck and build savings.
- Sound like too much? Start with a goal of setting aside $100 week=$5,200 a year, which is a nice cushion.
- As an entrepreneur, you want to be sure that whenever you take a cash draw from the company, you set aside money for tax. Don’t be surprised later with a nasty tax bill.
- Start now. The most important thing is to create a habit of saving each week.
You can also read more from SBA on how to determine when your business will be able to cover all its expenses and begin to make a profit in this guide: Breakeven Analysis: Know When you can Expect a Profit.
Click to read full article: https://www.sba.gov/blogs/6-tips-avoiding-common-financial-pitfalls-being-young-entrepreneur