Better Budgeting: How to Succeed in Business

How to Succeed in Business

Credit Wise (featured column)
by Jennifer Wallis

Maybe you’re tired of dragging yourself out of bed every morning when it’s still dark outside. Maybe you’re frightened by the thought of one more morning in commuter traffic next to women applying mascara at 70 mph or men on cell phones. Perhaps you suspect that your boss was the inspiration for the character Mr. Lumbergh in the movie “Office Space.” Or maybe you’re just sick of working for “the man” and think you’d like to be your own boss.

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Your dream is to start your own business. You’ve run the numbers, talked to your friends and family and think you’re ready to get started. But, are you? Have you planned sufficiently? What if no one else likes your business idea? Are you really ready?

Here are Some Tips to Help you Prepare

Do plenty of research:

Is your idea original or is the market flooded with your type of business? Have other people started something similar? If so, how much did they make? How long did it take? Are you in the right part of the country for your business to succeed? What works in California may not work in Iowa.

Know what you are getting into: 

Working for yourself may require many more hours than working for someone else. Are you ready and able to put in the hours needed to make your business a success?

Develop a business plan: 

It is important to know if your idea is profitable. How much money can you make? How long will it take to turn a profit? How much are start up costs? Contact your local Small Business Administration for help at www.sba.gov. If you need a loan to get started or plan to recruit investors, you will need a solid business plan.

Don’t quit your day job: 

Until you can be reasonably certain that you will be able to live off of the money that your new business generates, keep working. Build up your business on the side. You will need a steady income. Many people don’t plan sufficiently and don’t realize that their business can take a while to generate any money. Don’t get into financial trouble because of poor planning.

Pay yourself a set salary: 

Once you know that your business will support you, figure what you can pay yourself on an average month. If your business is seasonal, your income may depend on the undependable weather. You may need to offer additional services to supplement your income in the lean months.

Base your personal budget on your average income: 

If your business has a particularly good month, save any surplus for the months that aren’t so good. Once you beat your budgeted income for 6 months in a row, increase your budget.

Don’t mix business with personal finances: 

The #1 mistake that I see self-employed people make is to mix their business and personal income. It can be tough to stay disciplined but it’s critical to the success of your business and personal finances. I have seen too many people in trouble because they mixed their finances. If you have trouble with this, consider hiring a CPA to help you be accountable (no pun intended) to keep your business finances separate.

Pace yourself: 

You may be tempted to buy everything that you can for your new business and just hope to get paid back later. It may not happen, so don’t get overextended. Expand your inventory as your finances permit. Many businesses fail because the owner’s eyes were bigger than their bank account.

Avoid tax trouble: 

Taxes can be hefty when you are self-employed. Consider paying your taxes quarterly. Make sure you have a realistic idea of the tax implications before you get started.

Stay focused: 

Working for yourself requires a certain type of discipline. You may not get fired if you roll into work at noon but your business may not grow or succeed either. Most business owners commit to go to work at the same time every day even if it means walking from the bedroom to the office. You have to be disciplined enough to make that happen (even when the golf course may be calling your name).

These are just a few basic tips to help you get started in the planning process. Consult professionals such as the Small Business Administration, local groups that support small businesses and a CPA. The keys are to be prepared, be realistic, and be patient.

As you delve into the planning process, you may find out that your business idea isn’t as profitable as you once thought. It’s much better to find that out early. Don’t wait until you have invested a lot of time and money. It may be helpful to give yourself a deadline. Know when it’s time to throw in the towel if it just isn’t working.

However, if you develop a solid business plan you just may be the next big success story.

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Copyright © 2006 by Jennifer Wallis. All rights reserved.

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