Entrepreneurship 301: Financial Tips to Help Your Small Business Succeed

January 30, 2024

You’ve organized a business plan, you’ve decided how to fund it, and now you want to make sure your new business succeeds. Great work so far! After reading our previous Chambers blog posts on entrepreneurship, you’re ready for some financial tips to help you through your first year of business.


Create and Maintain a Business Budget

A critical element of success with your small business is going to involve keeping a budget and adjusting it over time. Doing this will not only help you meet financial goals, but it will also help you track your cash flow needs and keep your small business from acquiring unnecessary debt.

Take these steps to help you build a working budget:

  1. Determine your revenue. Your revenue is the money your business generates through sales before expenses are deducted. As a startup, you might need to use an industry average until you have enough months of sales to get an accurate estimate of average revenue.
  2. Subtract fixed expenses. Your fixed expenses are costs that stay the same regardless of how well your business is performing. They include things like rent, debt repayment, insurance, and advertising.
  3. Subtract variable expenses. Your variable expenses change with your business’s production and may need to be adjusted down during less profitable times. They include things like raw materials, owner’s salary, hourly labor, and utilities.
  4. Calculate Your Profit. Once you know your projected revenue and expenses, you can determine your net income. If your numbers are positive, you’re on the way to a profitable first year.

There are a variety of online tools available to help you put together a business operating budget, but most accounting software has budgeting features too. Remember to build one before you start operating.

Note: If you open a business checking account with Chambers Bank, you can utilize Online Banking to easily export your financial data to your accounting software. All data is compatible with QuickBooks and Quicken.


Keep Personal and Business Expenses Separate

As a rule of thumb, don’t mix personal and business finances together. Instead, make sure you’ve opened up a business checking account prior to your first day operating and use it exclusively for its intended purpose—business. Why? Because mixing finances makes tracking business income and expenses very difficult and can even get you into legal trouble if you’re ever audited.


Establish and Maintain an Emergency Fund

Having an emergency fund in a business savings account is an important way to make sure you have cash available to fuel growth or pay bills during lower revenue periods or times you cannot operate due to an emergency. In turn, this helps you avoid taking on unnecessary debt and subsequently lowering your profits.

As a rule of thumb, put enough cash away to cover three to six months of operating expenses. This will protect your business in the event of an emergency and at least help you cover fixed expenses.


Make Cash Flow Management a Priority

When starting out as a small business owner, it’s likely you don’t have a lot of extra cash on hand. But by keeping a close eye on your cash flow as the year progresses, you can anticipate when you’ll require more funding and then make funding decisions as needed.

Here are ways to stay on top of your cash flow:

  • Keep accurate income statements, balance sheets, and cash flow statements at all times.
  • Use accounting software to forecast your cash flow.
  • Invoice on time and follow up immediately when invoices are overdue.
  • Be prepared to take out a short-term loan or line of credit to cover seasonal fluctuations.

As you learn how to manage cash flow, you’ll also learn how to invest for growth and how to plan ahead for contingencies.


Keep Your Overhead Costs Low

Having a cash reserve gives your small business liquidity and provides you a valuable resource to draw upon during unforeseen challenges. 

With cash available, you’ll still be able to pay employees, suppliers, and vendors in the event you experience income loss. In this respect, it’s a good idea not to let your overhead costs surpass what your cash reserves can support. A standard rule of thumb for overhead is between 10-30% of your operating expenses.

To help reduce overhead, make finding ways to reduce expenses part of your overall business strategy–from paying less in rent and automating administrative tasks to negotiating with vendors, cutting down on utility costs, and more.

Overall, by keeping your small business’s overhead costs low, you’ll be able to maintain profitability, reinvest in your business, and operate with more flexibility.


Reinvest In Your Business

One of the most exciting aspects of a new business is seeing it grow and profit. And while it’s great to reward yourself for your efforts, remember to reinvest capital in alignment with your long-term goals.

Investing capital into marketing, technology, product or service development, and employees can produce good returns, but there are always risks, of course. In this regard, conducting risk assessments prior to moving capital will help you make good decisions.


Seek Financial Advice As Needed

When it comes to owning a small business, you have lots of moving parts to manage every day. On top of that, you have to keep up with changing rules and regulations, tax laws, and still manage your personal life. Without assistance, it can get overwhelming, so don’t hesitate to reach out when you need help.

Accountants are able to help you manage records, stay tax compliant, and maintain profitability while financial advisors can help you create financial strategies for your business and personal life. Business consultants will guide you on business and marketing strategies, leadership development, and growth planning.

Here are some no-cost resources you can utilize:


Chambers Bank: Your Partner In Business

Running a successful small business requires a lot of planning, motivation, and adaptability from you as a founder and business owner. Setbacks are likely to happen from time to time, but hard work and commitment to learning will help you reach your goals. 

If you have questions about your business accounts or any of our business banking services, please reach out to our Business Services team by filling out our online form here.

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