One of the first exercises of control for a new business owner, is to know their finances and to have the willpower to spend wisely. Realistically, until you have had a full year in business, you have no historical financial data that would be of any use in determining what your profits will be in the future. Even if you have been in the industry longer, or previously as an employee, situations and variables can change quickly. You might have money in the bank this month but what if you or your employees are ill next month? The weather can often cause fluctuations in expected trading figures and with today’s instant news culture, trends or news can skewer takings quite quickly if your client base become distracted from buying from you, at a time you had expected.
“Second thought” expenditure
Let’s assume your business is breaking even, at the lowest level, ie bills are being covered, even though you may not be taking full or any wages (most businesses aren’t in profit for quite some time in the early days so hopefully this would have been taken into account when working out your start-up costs). Depending on how big your business’ monthly turnover is, I would start with a ballpark “second thought” expenditure figure. By this I mean, items you come across under say, £250 (you choose a figure that sits well with you, and apply this to any future purchasing thoughts). An item under this sum can be bought without much analysis. Anything larger will require second and third thoughts, ie in-depth analysis and research, as mentioned in my previous blog – do your financial research and resist impulse spending.
If your business isn’t in profit and by “profit”, I mean you are actively taking the wages you pre-determined for that financial year, all costs are met and you have surplus funds for a rainy day (and believe me, it often pours in the early days!) then unless the planned purchase is quite a game changer, according to your research, then the answer would be “not now”.
If you really must spend, do your research on pricing and get a credit card with 0% interest for as long as possible – even a personal credit card, to be used only for the business, and be sure you can pay it back within the allocated time. But really, this is for emergencies…
Remember, cash is king – if you haven’t got it – don’t spend it – concentrate on EARNING instead… how you can make more money this month?
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