Cash-Strapped Entrepreneurs: Tips for Better Money Management

Business.com / Finances / Last Modified: February 22, 2017

One of the most common challenges that aspiring entrepreneurs have is a lack of funds, so it's very important to manage your money well.

To attain success through financial independence, one must learn how to let their money work for them by establishing a business or any other source of passive income.

This is something that people who strive to work for money will never understand. And for those who do are the ones who have adopted an entrepreneurial mindset.

However, one of the biggest and most common challenges that aspiring entrepreneurs have is the lack of funds. Even if they’re able to get started, chances are they cannot sustain growth due to the lack of effective money management.

Related Article: 5 of Your Biggest Startup Problems Solved

The hard truth is that most entrepreneurs will fail repeatedly and lose money for around 6-12 months after starting, sometimes even longer. And in the entrepreneurial world, when the going gets tough, the tough get going.

Remember that failures are crucial stepping stones in business. Anyone can aspire to become entrepreneurs, but not everyone has the persistence needed to keep going and start leveraging mistakes to point them in the right direction.

Unfortunately, failures cost money. Without money, you simply cannot sustain your business even if you do have the drive to keep going.

With this being said, you need to start implementing money management strategies that will fuel your business on the road to success. And for those who often struggle financially to sustain their business, here are the top 5 tactics you can learn.

Have a Cash Cushion Ready

“Try to maintain at least a 3-month emergency fund that can help with unexpected expenses or those months that don’t do as well as you had planned in your projections,” says Marcus Roberts of Mirador Wealth Management.

Having a cash cushion and strictly following a budget is not only important for entrepreneurship. It is also crucial if you want to prevent your personal finances to suffer as you pursue your business. A good strategy to secure your cash cushion is to have it deposited in a separate account which cannot be used for online transactions.

Use Free Apps as Much as Possible

The world of businesses – online or offline – have evolved past a point where a competitive advantage can be bought with money. In online marketing, there are a growing number of premium tools that can speed up company growth and automate time-consuming processes. This is why well-established firms have an easier time expanding and adapting than smaller startups, which are forced to compensate for the lack of funds by working a lot harder and investing more time.

As a small company, you should definitely avoid spending money on tools that are inessential to your business. Focus on the ROI and assess whether or not everything you invest on actually matters to the survival and growth of your company. Fortunately, a lot of paid automation tools have free or trial version alternatives, particularly with mobile apps.

And to make sure you stay wise with your investment decisions, always opt for free tools such as MailChimp (email marketing platform) and Brightbook (online accounting tool) first before purchasing their premium counterparts.

Additionally, you should focus more on motivating your employees (and yourself) to maximize productivity. One tip is to encourage them to work smarter rather than harder. You can do this with time management and focus-inducing apps such as Toggl (time management app) and Noisli (productivity app). The good news is; these productivity-boosting tools are free to use.

Related Article: 5 Money Management Tips For Any Business Owner

Seek Help from P2P Lenders

Not to be mistaken for crowdfunding – P2P lending is an investment practice of financing companies in exchange for an interest rate, whereas in crowdfunding, investors are promised either a reward or equity. Looking at the bigger picture, P2P lending is often seen as the less risky option.

“P2P lenders remain private companies funded by investors or institutions looking for returns from alternative fixed income investments,” says Shindy Cheng in an article at The Huffington Post. “They mostly follow proprietary data models to determine loan approvals, and are competitive when compared to traditional bank financing and depending on credit risk.”

Today, there are several P2P lending platforms you can find online to finance your business needs. If you’re low on funds, consider looking for P2P investors first before trying new ventures in your business. This will help mitigate risks and speed up the growth of your business. To get started, you can find them in a wide variety P2P websites.

Refine your Sales Process

With the overreliance on automation and online selling platforms like Shopify, a lot of entrepreneurs, particularly those running online stores, overlook the importance of having a refined sales process.

You could be making sales and even manage to attain positive cash flow. But unless you have a solid, repeatable sales process and having a firm grasp on actual figures (earnings, receivables, etc.), it is nearly impossible to develop measurable and effective plans of action for the future of your company.

You must have a repeatable sales process, as well as a solid knowledge of your numbers. Do cash flow projections for the 12 months ahead, and then document the actual against the forecast figures.

Related Article: Why Company Culture Matters More to Employee Than Pay

“Keep it Simple, Stupid”

Again, it is common for businesses to struggle during the first year. A dedicated entrepreneur is expected to invest a lot of time in the business. And from time to time, the entrepreneur may also need to shell money out of his own pocket to support the company’s expenses

Being an entrepreneur takes guts. It takes a mentality to not work for a salary initially. Ensure you can see out that first 6-12 months with either no, or very little and essential living expenses.

Whether you’re trying to save up for a cash cushion or not, frugality is always a strong quality to have for money management. This means you have to consider absolutely anything that can save you money; from walking to work, preparing your own meals, skipping on overpriced coffee, spending weekends at home, and so on. These things can wait; but the heavy costs of supporting a business can’t.

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