Making Sure Your Entrepreneurial Spirit Doesn’t Hurt Your Finances

People with an entrepreneurial spirit are driven, and they have lots of ideas and energy. If this describes you, consider how your business results impact your personal finances. Use these tips to keep your business and personal finances well organized, and to make informed decisions for both categories.

You’ve got a mind that’s flooding with ideas. You can see what your business will look like, how it’ll make money, and what you need to do to get the project underway.

But before you get too far down the rabbit hole of planning your business, keep in mind that your business is going to have an impact on your personal finances, even if the business records are completely separate from personal records. Take these steps to ensure your business journey doesn’t hurt your personal financial landscape.

Your Finances

You don’t have to have an entirely rosy financial standing in order to start a business, but it’ll help if it’s not in a state of disarray. If you’ve got a lot of debt, then you’ll find it more difficult to get the funding you need to get your business underway. While you may be able to get some types of funding, they are unlikely to be at reasonable interest rates.

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It might be worthwhile to focus on paying down some of that debt, and getting your finances under control- before pursuing a bigger project.

Business Risk

As good as your idea might be, it’s not worth wiping yourself out financially. Of course, there’s always a risk attached to starting a business. The trick is to make sure you’re taking a reasonable level of business risk.

So how you do assess the risk?

Invest the time to create a comprehensive business plan before you start your business. The plan should include marketing research, and several years of projected financial statements, among other items. Writing the plan helps you address every critical factor in your business, which can reduce risk.

Once you write the business plan, consider a variety of sources for the start-up cash you need to get your business up and running. You may consider traditional business loans, peer to peer loans, crowdfunding, or bringing investors on board.

How to Separate Finances

It’s imperative that you keep your finances separate, so that your business expenses should not overlap with your personal expenses, and vice versa. Do this from the very first day you open your business; the longer you wait, the more difficult it’ll be to sort one expense from the other. This means having a business account, credit card, and so on.

Keeping records separate allows you to accurately track your business profits.

If Things Go Wrong

You would like to think that your business is going to be a success, and will flourish for years and years to come. But of course, there are no guarantees; most new companies don’t make it to the five-year mark.

Make sure you’re planning for potential legal issues by working with a firm like Hackard Law; by implementing asset protection measures, you’ll protect your personal savings. You can’t prevent things from going wrong, but can minimize the extent of the damage.

Knowing When To Quit

You might have an unwavering belief in your business, and while this is usually a good thing, it can potentially be a problem. To keep your finances healthy, it’s important to know when you should continue to roll the dice, and when to quit.  These are tough, emotional decisions, so ask friends and business associates to help you with this issue.

Use these tips to keep your personal finances on track, and to grow your business.

This post is for educational purposes only.

Ken Boyd

Author: Cost Accounting for Dummies, Accounting All-In-One for Dummies, The CPA Exam for Dummies and 1,001 Accounting Questions for Dummies

Co-Founder: accountinged.com

(email) ken@stltest.net

(website and blog) https://www.accountingaccidentally.com/

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