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How to be financially ready to start a business?

Now a days, everyone is well-known from the term “startup”, and many of you tried to go for the same. But have you wonder ever that some Startups become the giant industries gradually and while others get the downward slide. Why does it happen? Yes, innitial planning is a big factor! Before execution, solid planning is the basic key to success. Other than observing market scenarios, initial financial planning demands a lot of considerations.

Here I am telling you some key to points towards financial worthiness for starting a business:

Initial startup cost:

Simply, what does your pocket or bank balance support? Depending on the size of business, you need to manage the initial capital. First of all, decide that how much money you are able to invest at the startup risk. If you are going to operate online business or company, it will cost less to you. But in retail shops or factory, the cost of furniture, machinery, and staff will increase your initial cost. So, open up your mind and avail the best benefits option for you.

Coverage for fixed cost:

If you are planning to start your own business by taking premises or factory on rent, you will have to pay rent irrespective of the fact that you have started the business operation or not. These are the fixed costs which need a recovery source to keep your business away from negative worth. You will be able to achieve the break-even point earliest only if you are able to cover your fixed cost or to gain some fixed income. Calculate you all fixed costs and set a proactive approach accordingly.



Variable expenses:

Operating income is needed to meet day to day expenses. Check the source of operating income or fixed income that you can afford your living expenses at the time of initiation of the business or low time of the business. Apart from this, Startups have some other variable expenses like stationery and electricity. So, for the smooth running of a business and financial strongness, there should be other income sources.

Research the target customers:

In every business, the client base is the most important aspects of your business progress. So, before starting any business, research the hit customer areas properly and read the mentality of the same so that you can start from profits only. This profit gearing idea will help you surely in making the strong foundation for your business.

Enough monetary support:

One needs more savings to start a business after deducting regular living expenses. Any business has first and foremost target is to cover expenses and get the net profits. In the start, if you are able to cover your expenses, you can save afterwards. To raise the capital in long-term, enough money support is necessary.

Proper understanding of taxation:

There is different tax treatment for different income structure. Tax is also an expense and obviously obligatory expense if you fall in the tax bracket. Though there are different mechanisms to reduce your tax but all you need to have a better understanding of the taxation concepts for your business income. Go for the presumptive taxation if you are having the lesser turnover to save the tax burden for your newly setup business. Moreover, there are several tax benefits to promote the startup, so understand them very well.

Credit worthiness:

In almost all business and even in Startups, goodwill and your social circle play a vital role. From the money rotation to the credit facility, there should be an element of credit worthiness to boost your confidence and get support in the start. Avail this credit option only if you are facing crucial financial problem to start your business. Bank loan can be other option to support your startup financially.

Backup plan:

An alternative source of income is good to make a solid financial ground for your personal as well as the business life. Apart from the financial strength, a backup plan gives you mental strength too so that you can work worry-free and give your 100% attention towards your new business.

By and large, your Startups are easy and successful only if you plan well and execute it without variation. Estimate your future revenue and expenses today to build the sound financial base. Where there is will, there is a way. So, find out the best way to make you financially sound.

About Vikas Agarwal

Vikas Agarwal is an IIT-Varanasi graduate in Chemical Engineering. He is the Founder and CEO of Finaacle.com - an investment advisory website. He is a Business Development Professional but a Value Investor at heart. He writes articles on Finaacle, which focus on simplifying the art of investing and the causes of human misjudgment when it comes to investing. He also shares his experiences as an investor and lessons from some of the greatest investors of all time.

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