Personal Finance Habits of Successful Start-Up Entrepreneurs

  • By: joannafurlong
  • Posted: April 19, 2017

By Beth Kotz

The world of business can be a minefield, and for female entrepreneurs this holds doubly true. To get a profitable startup up and running you’ll need a strong backbone and habits to guide your financial compass when the going gets tough. Read on for a few tested-and-true financial rules to follow as you find your own path to success.

personal finance tips for startups

Grow your spending slowly.

You must deploy your capital carefully when running a startup. Resources are probably pretty thin on the ground, which is why it’s critical to get the maximum possible value out of them. Frivolities like new office furniture, decorative artwork and top-of-the-line computers are unwise investments because you’re unlikely to see a positive return on them.

Instead, focus first on mission-critical infrastructure. Then, after you begin to book significant revenues and profits, you can turn your attention to more ancillary spending. By refraining from splurging now, you’ll benefit from the compounding of your business, kind of like how bank accounts benefit from the compounding of interest. If you charge too much on your credit cards, though, it’s the card issuer who will be getting compound interest from you.

Understand your liabilities.

No matter how small your enterprise is, you could be on the hook for significant amounts of money if you don’t take the time to fully comprehend what your liabilities are. In our litigious society, you may be sued at the drop of a hat, so it pays to review your legal situation with an eye toward reducing your exposure. Certain employee benefits packages, like retirement and health plans, could cause your expenses to skyrocket unless you manage them with care. Credit card fraud is an omnipresent danger if you accept payments via this means. It might be wise to investigate a business insurance policy to limit your risk in case of events that aren’t completely under your control.

Use small mistakes to avoid large ones.

There’s too much at stake to hazard your whole business on the roll of a dice. Before committing to any large-scale endeavor, whether it be a product launch, new promotion or regional advertising campaign, institute a small trial run first. You’ll be able to see how everything goes, fine-tune your strategy and deploy whatever corrective measures are necessary before implementing the final version of your idea. In the worst case, when there’s a complete failure and you have to eat a total loss, you’ll be glad to have only lost a small fraction of your bankroll rather than being forced to close your doors.

Build a network through deal-making.

You’ve undoubtedly discovered that performing your tasks efficiently and excellently is only one component of attracting clients – perhaps the more important element is networking with others in your industry. Besides attending social gatherings and professional conferences, you can also network through the deals you offer prospective clients.

It might be worthwhile to make a zero-margin or even negative-margin arrangement, assuming the costs aren’t too great, to get into a business relationship with someone who will be poised to enhance your standing in the community going forward. Not only will you have the opportunity to make more favorable contracts with that same client in future, but he or she may spread the word to other potential customers about how beneficial it is to work with your organization.

Understand cash flow.

It’s understandable that you might experience negative cash flow in the early days of your company especially if you had to take out a loan to obtain your initial financing. Financial responsibility is key, however, from the moment you set up shop. You’ll need to recognize exactly how long you can maintain operations at your current levels of expenditure, income and savings. Without this insight into cash flow, you might find yourself spending money you don’t have and then being puzzled when the bills come due. Larger organizations may have more room to play with here because they can issue bonds, use lines of credit and negotiate preferential payment terms, but you, as a small entrepreneur, most likely don’t have access to these sophisticated tools.

Don’t stint when it comes to customers.

Every customer-facing aspect of your firm should bespeak professionalism and competence. If you offer clients a free drink when they arrive at your facility, it had better not be a generic, store-brand soft drink. Similarly, if you operate a retail location, the floors and shelves must be spotless, and the lighting must be bright. Don’t skimp on these elements that send an impression about you because doing so could really backfire in a big way. On the other hand, you don’t need to spend needlessly on areas that your customers will never see. These might include storage rooms or other parts of your facility that are only accessible to employees.

Plan for emergencies.

There are plenty of unforeseen events that could sink your business: a shift in market preferences, the sudden emergence of a well-funded competitor or just a dwindling demand for your services. It’s prudent to set up an emergency fund that you can draw upon when times are tough. This will allow you to weather the storm if it turns out to be a temporary challenge. If the trouble is more serious and long-lasting, you can use your emergency resources to come up with a sensible plan for either investing in what you need to remain competitive or perhaps even changing course entirely.

Constantly generate revenue.

As your organization gets larger and more diverse, you may find yourself dedicating your time and energy to paperwork, meetings and other unproductive pursuits. Some of these corporate chores probably do generate a little bit of revenue, but it’s vital that you guard against letting them get out of control. The majority of your activity should center around productive tasks that contribute to your company’s bottom line in a tangible way. If you’re currently doing too much accounting or purchasing or IT work, then it could be time to hire an employee or contractor to take care of these things for you so that you can refocus on your core business responsibilities.

Whenever you establish a new enterprise, it might feel as if you’re all alone, but in reality, you have the experiences of past individuals to draw upon. Make the financial habits of now-prosperous startup founders your own, and you’ll be beginning the race with a valuable head start.

Beth Kotz is a contributing writer to She specializes in covering financial advice for female entrepreneurs, college students and recent graduates. She earned a BA in Communications and Media from DePaul University in Chicago, Illinois, where she continues to live and work.

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