Starting a new home business can be exciting, nerve-wracking, and energy-sapping all at the same time. On the one hand, you are on your way to financial independence doing something you love. On the other hand, there are things you have never had to deal with before and which you may know nothing about.
This is especially true during the COVID-19 crisis. Many people now have no option but to start a home business, having lost their full-time or part-time jobs. While this may be a blessing in disguise for some, it comes with a tremendous amount of challenges.
One of the biggest challenges is dealing with finances for the first time. If you have been employed with a 401K, you have only had to deal with what you do with your income. But with a home business, you need to figure out what you need to be making, how your income will look when taking business expenses into account, and how much of it you should be investing back into your business. These are just some of the considerations.
The good news is that many have done it before you. They had no more experience than you and did not necessarily have a “mathematical brain.” Take the following into account.
Budget for now
Start off by making a budget of what you own, earn, and spend right now. Include your assets, any debt you are paying back, and your net spending each month. Make a note of where you spend more than you need to.
This budget should begin to give you an idea of what you need to be making each month. It will give you an idea of how much time you have to get to that level of income. And it should start the process of discovering just how much you need to get your business started.
Next, you need to brainstorm what you will need to spend to get your business started. This will vary greatly depending on what type of business you are starting. If you are freelancing and only need a computer and internet connection to work, you may already have these things. The expenses you will need to factor for will be limited to things like a website, advertising, and possibly investment in a course that will help you get started.
If you plan on creating and selling products, however, your expenses are going to be much higher and more complex. It is crucial that you are comprehensive in this process. Only by knowing what you need can you begin to source the capital.
Chances are you have a limited amount of your own capital to get started with. If you do not source capital from elsewhere, you may not be able to run your business and pay your bills at the same time. And if you don’t start making a profit immediately, you could get stuck.
The most reliable way of sourcing capital is by getting a loan. While there are many types of business loans, you can also get personal loans for all credit levels. This will be easier for those who need the money to get started right now and who need to buy time to figure out how to make their business work.
Alternatively, pitch your business idea to angel investors or venture capital companies. If you can provide good evidence of the profitability of your business, they may want to help you get there. The best venture capitalists provide not only money but mentorship along the way.
Learn about taxes
Taxes are complicated for most people. However, if you are running your own business, you need to know as much as possible about taxes. You need to know how much you should expect to pay, which expenses are tax-deductible, and how to register your business in a way that guarantees you lower taxes.
It is very tempting to put this off until later, but you will regret it if you don’t know what you’re doing when tax season comes around.
Finances may be the most difficult and least exciting part of starting a home business, but doing this right is crucial. It can make or break your business, and you should be ready to learn everything you can.
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