Starting your own company is the dream that more and more Americans are acting on. The thought of being your own boss, having financial independence, and growing your dream from the ground up has an allure unlike any other.
The premise behind starting a business is, of course, to make money. Where most start-up businesses get stuck in the mud is when the prospective business owner does not possess the financial acumen that is necessary to start the organization and propel it in a direction of sustainable growth. Before a company is opened, one must make sure that their own personal finances are in order so that the business will be recognized as a stable organization of good repute.
It is quite difficult to start a business when a mountain of debt is piled on top of you. Naturally, most businesses require that there is a loan of some type taken out to secure important details such as a building lease, or equipment that is needed to be a part of day-to-day.
What may hinder up the ability to acquire such a loan is if the business owner has shown credit history that is shown to be irresponsible.
If the business owner enters the bank for a loan, and it is discovered that they are $12,000 in credit card debt, have a repossessed vehicle, and they have missed their last two mortgage payments, this history is not indicative of a winning endorsement.
In order to create business that lasts, the owner must be able to create a plan of action that reduces the number of red flags in their financial history. Creditrepair.com is a great place to start because it offers tools that assess where you currently are in your financial journey and creates a viable plan of action to escape the debt trap.
With debt paid, the prospective business owner is freed to focus on other aspects of running the business that are just as important. Starting a business is a tremendous deal of work, and the stress of taking on that venture is amplified when unnecessary debt is added into the equation.
It is also important to get debt under control because one never knows when they may have to borrow at another time. Unpaid debts that are not regularly maintained could subject an individual to negative hits to their credit history. Having a poor history of credit can not only prevent you from getting additional assistance when needed, but bad credit can have a long-lasting effect on your reputation.
A company owner must make sound business choices long before their business opens. This begins with managing the budget at home. Creating a monthly spending plan will not only ensure that money is going to the right place, but it will also build good habits for the business owner as they begin to establish day-to-day business operations.
Most of us like to think of ourselves as using good judgement when it comes to spending money. As a new business owner, it is important to make sound budgeting decisions before a single dollar is spent. If you are unintentional with how you spend your money before starting a business, it is very likely that that same behavior will continue after the business is opened.
Additionally, it is essential to be mindful of spending habits because emergencies can (and will) come up. When a business owner is not mindful of where their money is going, or if they are spending it in a frivolous manner, the door is opened for an unforeseen circumstance to take the business under.
For example, let’s say that a new restaurant owner has put all of their funds toward promoting the grand opening as opposing to saving for potential emergencies. 3 days before opening, a fire breaks out in the kitchen which destroys one of the stoves and the insurance company will not pay for the claim. Now, the owner is forced to scramble for a solution because they did not allocate their resources properly. Yikes.
As you can see, budgeting and proper allocation of resources is a key trait to develop before a business is to be opened. Having your personal finances intact is the precedent for having a sustainable business model. You gain trust from lenders, customers, and your employees when you are able to make smart choices with money and eliminate unnecessary debt. The worst type of sabotage for the goal of starting a business is self-sabotage due to poor decision making and unwise planning. Watching your spending and dealing with debt can make all the difference between having a successful business, and closing your doors within 90 days.