Starting your own business can be a real adventure, but if you want to be successful you’ll need more than passion. You will also need to know how to manage the money your company spends and earns so that you can avoid losses and grow effectively.
Money management is vital to any business owner, but freelancers and solo entrepreneurs need to be especially cash-conscious.
It can be easy to forget that sole proprietors are still entrepreneurs, and that many of the same financial skills that startups rely on also apply to them.
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The following is a list of skills that every entrepreneur should master if they want to become successful. No matter how modest your beginnings, you can use these skills to take you to the top of your game and maximise your success.
Understanding credit
Credit is something that a lot of businesses overlook until it’s too late. Why is credit important? Simple: it tells you where your business stands, and determines what kind of options you have going forward.
As an individual, you have a credit score that can affect your ability to borrow money. If you have separated your personal finances from your business finances (which is strongly recommended), your business probably has a credit score, too.
Use any of the three major credit bureaus—Equifax, TransUnion, or Experian—to determine your level of credit so that you can plan your future financial strategy.
Budgeting
Knowing the amount of money you can afford to spend on each project is going to be a vital part of your success.
You should always know how much money your company is taking in each quarter, as well as how much it is spending to continue operating.
Understanding these variables will tell you exactly how much you have leftover to reinvest.
Project management
Wait a second, you’re probably thinking—isn’t project management more about productivity than finance? If you don’t believe the two are connected, think again.
Your ability to complete tasks and finish projects on time has a significant impact on your ability to work within your budget (see above).
There is a major overlap between projects that are finished late and projects that end up being over budget. So, if you want to save money, make sure you can get your work in before the deadline.
Investing
Understanding how to spend money on your own company is important, but knowing when to invest in other profitable ventures can also be extremely valuable.
A growing number of successful entrepreneurs recommend investing in other startups, as long as your picks are diverse.
After all, 75% of all startups fail, but putting some of your money in just one other promising business could save you both.
Borrowing
Sometimes, the only thing your company needs to break through is a little extra working capital—but how do you get it?
One of the easiest ways to do so is by taking out a loan. You just have to know what you’re getting into beforehand. Different lenders offer different terms, which may be more or less beneficial to your business.
Generally, it is advisable to look for short-term loans that can be paid off faster to avoid high levels of interest, and for companies that will approve you quickly—even if your business credit is not yet perfect or well-established.
You may also wish to look for loans that are uniquely suited to your needs as an entrepreneur, such as loans and grants only for women, specific industries, or people in particular geographical areas.
Understanding the skills above can do more than simply improve your business—it could make the difference between success and failure.
Make sure you are familiar with the items on this list, and refer to it often. With a little luck, your company will be thriving in no time.
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