Ten Tips for New Small Businesses

I pulled this one out specifically for a couple of reasons. One is that when you start a small business you have enough stress to worry about in the first 6 months to a year. Starting that business with out a viable cash reserve beforehand has always been one of the main killers to any business. It may even be your downfall because you can't get your household and living expenses taken care of only to rely on credit you don't have the cash to pay for. Then entrepreneurs are out looking for a part time job just to make ends meet and are taking that time away from growing their business. When you are planning to start a business look at ALL your potential expenses and make sure you either have saved enough to cover them until your business takes off, or you may be in serious trouble when it comes to succeeding with your business idea.

Save up as much money as possible before starting.
All too often, people go into business without any savings, exclusively using loan money from friends, banks, or the SBA. They except to be able to start paying the loans back right away with their profits. What these business owners don't realize is that it can take months or years to make a profit. And once a lender discovers a business isn't as profitable as expected, the lender is likely to call in the loan or refuse to renew it for another year. Often new business owners then have to take out home equity loans or use credit cards to pay off their loans (which puts their home and credit rating at risk). For more information, see Business Financing FAQ.

A better plan is to save up as much of the needed investment money as possible, including your living expenses for the first year, or even two. Odds are that your business won't be profitable for one to two years. Even if you get plenty of business coming your way -- and your customers pay you on time, which isn't always a sure thing -- you'll want to be able to invest most of that money back in the business for space, equipment, advertising, and insurance needs.

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