Are you planning on opening a business? Have you created a plan and really written out a budget and forecasted sales/expenses? This is an extremely important step to improve the probability of the success of your business.
I have recently seen the frustrations that have arisen because a business owner didn’t really sit down and look at the cash flow that would be needed to cover the known monthly expenses. And as anyone knows who starts a business, there are often unexpected things that can pop up and have an impact on profit.
It’s important to write down known expenses and estimate the income that will be generated once the business opens and how much cash will be available to pay the bills that will be due including rent, operating costs, financing fees, materials, and more. And often it costs much more than estimated to actually get the business open. If in an industry that needs a permit, it may take weeks or months to get approval, and in the meantime, rent is due on your space. Improvements on the property can also take longer than originally planned meaning your open date is pushed back later than planned.
Look at businesses in your industry to see average profit margins. Then because new businesses usually aren’t as profitable as established businesses, reduce the expected income and increase expected costs. Will you be able to cover your monthly expenses with the income generated from the business? If not, what you can do to reduce them? Perhaps it’s finding a different location where the rent is less. Or finding other vendors who can provide materials for less money. Can you get longer terms to pay off the invoices? Do you need to get a business loan to have operating capital?
I want you to be successful when you start your business, so please do your due diligence before signing a lease and dropping a lot of money on start-up costs. And realize it may take at least a year or two to generate enough income for you to pay yourself. Proper planning and having enough cash available is important to lay the foundation for your business success.
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