Starting a business is an exciting leap—and one that millennials, in particular, are increasingly taking. By many measures, millennials might be considered the most entrepreneurial generation in history.
A study by America’s SBDC found that 49 percent of millennials want to start their own business within the next three years. Even more—54 percent—said they would quit their job within the next six months with the right resources to make the switch to entrepreneurship. Meanwhile, 24 percent of millennials are already earning at least part of their income from a business they own or have a stake in, according to the Independent Community Bankers of America.
With so many millennials poised to pursue their big ideas, it’s important that aspiring entrepreneurs have the financial wherewithal to complement their passion and courage. Finance is, after all, the foundation of business. Follow these tips to position yourself for success as an entrepreneur.
1. Separate Business from Personal Finances
It’s the most fundamental rule in the book, but one that even seasoned entrepreneurs struggle to implement if they don’t do it at the start. A business checking account is an easy tool to create a clear divide between your personal and business finances. Even if you’re using personal funds to start your business, you should still physically move those funds into your business account for accounting and tax purposes.
2. Build Your Core Team
If you are truly going to commit to building your business, you need the right people around you from day one. The essential advisors for every business owner are:
- Business banker
You need these professionals early on more than ever. Luckily, you can hire legal and financial experts without having to bring them on full-time. What’s more, a business banker at your local financial institution will speak with you free of charge!
3. Account for Startup Costs
What money will you need to set aside in order to officially launch your business? Consider the fees for entity formation, along with the costs for business cards, a website, and any necessary software. If you plan to sell a product, you will also need to allocate funds for inventory, storage and logistics, in which case a business line of credit can be extremely helpful in providing some much needed breathing room.
4. Minimize Early Overhead
The beauty in today’s entrepreneurial landscape is the endless opportunity for starting—or at least starting as—a home-based business. Yes, the “work from home” dream is real—and profitable. According to Gallup, nearly 50 percent of Americans reported spending at least some time working remotely in 2017. With the workforce continuing to demand flexibility, we can expect working remotely to become more of the norm.
What does that mean for an incoming entrepreneur? Little to no overhead. Instead of signing an office lease, you can set up shop at home and get a P.O. Box for your business mail. You can also save on transportation, meals, etc. Save the expenses for when they become absolutely necessary.
If you do require an office, it’s still wise to make a point of keeping your overhead as low as possible for as long as possible.
5. Track Expenses
Develop the habit of logging expenses frequently and thoroughly, and you will avoid another common pitfall that causes entrepreneurs headaches. Your expenses help you reduce your tax liability, not to mention gain a stronghold of your cash flow. A simple Excel spreadsheet is a great tool to start. There are also apps that make it easy to digitize your receipts for safe and organized recordkeeping. Find the routine that works best for you, whether daily, weekly or monthly—as long as you’re not neglecting your expenses for extended periods that could result in items being forgotten.
6. Pay Yourself Appropriately
There is a lot of merit to rolling up your sleeves, working hard, and putting your earnings back into the business. That said, it is also important that you pay yourself a reasonable salary. This is both for tax reasons and for you to be able to viably continue on the entrepreneurial journey. A great method is to pay yourself a set percentage of your revenue, and then distribute the remainder between your business checking and perhaps a business savings account. From your salary, also transfer a portion to your personal savings. This way, you are building all of your balances, slowly but surely.
7. Bank Locally
One of your best friends in business is your local bank. In Monmouth & Ocean Counties, Manasquan Bank provides all of the tools and resources of a large national bank, with friendly, personalized service. We have been supporting local commerce for more than a century, and are here to help you start and grow a thriving business. Learn more about our business banking toolkit and speak with your own dedicated business banking specialist today!