If you are thinking about venturing into the business world, there are undoubtedly many things running through your mind. Will my product be good enough? Will the marketing plan I have chosen get me the results I want? How will I manage to cope with the stress? These may be just some of them. However, the major question running circles around your head might be: how am I going to fund it all, and how much debt will I need to go into?
The answer to that last question might be quite straightforward: none. If you play your cards just right, there are ways to stay out of debt in the long term and in the short term, and stay on top of your finances at all times. All you have to do is stay vigilant about your cash flow, and work with the right people. Here is how to stay debt-free in business.
The importance of planning
This is basically the first tip every single article about setting up a company lists. You need to plan well, and you need to plan on time. While that initial spark of an idea might come easily enough, and you may be all set to win big – without the right plan, there is no way to succeed.
Focus as much of your time as you can on market research. Especially in the very very beginning, when you still have the time to do so. Invest thrice as much time in it as you think you need to, and don’t leave any idea unexplored. Write down every brilliant brainstorming moment you have in the middle of the night, and make sure you check out how feasible it is the next morning. Look up every competitor you can think of, no matter how small, and see what they are doing and how you can improve on their strategy.
Working on your business plan will only cost you your own time at the beginning, and that’s what you should invest most of. Once you’ve launched your product, it may be too late – you need to have a solid plan and solid milestones in place well beforehand.
Keep an eye on the cash flow
This might seem like a given, but believe me, countless executives and CEOs only keep one eye on their finances, and that one is half closed. In fact, you absolutely should not be the one to mind the finances. You need to hire a reputable accountant, who will do all the heavy lifting for you, and take care of all the financial aspects of running your business. First of all, they are more experienced in this than you are, and secondly, you will have more time to focus on the things that you are good at, knowing the money is watched over. I can highly recommend the good people over at Gilmour & Co, who have helped both of my companies tremendously.
Mind where the money is going
This one ties in with the previous point closely – if you want to stay out of debt, you need to mind what you spend on. Not only your expense account, not only the payroll, everything. Have your accountant set up a plan for meeting once every so often, so that you can go over the state of your accounts. You should also especially mind your taxes, and make sure you file them on time. Again, turn to your accountant for both advice and help.
Make sure you are always on the lookout for ways to save some resources. Can you renegotiate a contract with a supplier? Is there a discount on the subscription to one of the tools you are using? Can you work with different companies which offer better value for your money? You don’t need to look for ways to save money necessarily, but you do need to get the best bang for your buck, so to say.
To borrow or not to borrow
There may come a time when you might feel that borrowing a certain amount of money can help you grow more quickly. If you do choose to take out a loan, for example, make sure you calculate your interest rates very carefully. Will the amount of money you are able to make be at least twice as much as the amount you will have to pay in interest? When will this money be made? Can anything happen and delay your growth?
If you do choose to go into debt to fund your growth, you need to be absolutely certain this will not be detrimental to your future plans. While investing in better equipment or an extra employee may be tempting, make sure you consider all the implications. Once you do borrow capital, you will no longer be out of debt.
Make sure your initial business plan has a scalable growth model in place, and stick to it. While you may be growing at a slower pace, this may save you some money in the long run, if you are careful.
The right investment
Finally, make sure you invest your resources carefully. By this I mostly mean your actual revenues. Always pour the money back into the company itself, if you can do so. If you choose to spend it all on company bonuses and new office supplies, you will not go wrong either, but make sure that’s actually what your employees need. Resist the temptation of investing your own personal funds in the company, and stick to your business plan. If you have crafted it right, you should be able to fund your own growth, without the need to reach for outside funding.
