Solopreneur – a fancy term which means a sole proprietorship business or, in literal terms, solo entrepreneurship. Today many of you are becoming financially self-sufficient by opening up your own business. Solopreneurship has, therefore, become quite popular. Whether it is small scale business like clothes boutiques, salons, cafés, or medium to large scale enterprises, managing your finances is very important. In fact, in case of solopreneurship, financial management becomes all the more necessary as it is a one-man show. You are responsible for handling your business, managing its affairs, face its losses or enjoy the profits. If you don’t plan your finances effectively, you would face financial difficulties. Here are some tips to plan your finances if you are the proud owner of a sole-proprietorship business –
Don’t mix your personal and business financials
When you own your business yourself, the most common mistake which you make is mixing your personal and your business’s income and expenditure. This is a very big mistake. Your business incomes and expenses should remain separate from your personal ones. What your business earns and spends should go in your business accounts, not in yours. This way you would be able to judge the profitability of your business. Have a separate bank account for your business and personal use. While you might not account for your personal incomes and expenditures, those of your business should be accounted for and audited carefully so that your business financials can be drawn easily.
Know the goals of your business and invest your profits towards them
It is often tempting to use the business profits to treat yourself for your hard work. You should, however, avoid this temptation. You should create specific goals for your business and reinvest your business profits in the business to achieve those goals. When the profits are reinvested, you can expand your business slowly and steadily over a few years. You can also improve your venture using the profits to provide better consumer satisfaction and to increase sales. As far as your treats go, avail a salary from your business for managing it. This would create your income and keep your personal income and your business revenue separate.
Don’t forget to invest for your personal goals
It’s important to remember that there’s a big difference between investing in your business and how you should invest your personal savings. Often, entrepreneurs believe that their business would take care of all their future requirements. While it is good re-invest your savings in your business, it is equally important to build diversified, long-term investment portfolio in line with your personal financial goals (like retirement, child’s education etc.) that will grow separate from your business. This way with time, you can create both a successful company and a steady source of income to use if and when you choose to retire or any other personal goal.
Plan your business’s taxes as well
Your business is also required to file its tax and so, while you plan for your personal taxes, plan for your business’s taxes as well. Look for investments and expenses which would give your business tax reliefs and use these reliefs to lower the tax burden.
Have a business emergency fund
Your business might face an emergency where funds might be required instantly. While business loans do provide funds, they might take time. That is why you should plan for an emergency fund for your business. Use the business’s ploughed back profits to create an emergency fund which would prove helpful in rainy days.
Your business is your child and you are solely responsible for bringing in workforce to help you manage your business. Since you are your business’s HR manager as well as top-management, be careful when choosing employees. Hire trustworthy individuals and delegate tasks so that you don’t have to be the jack of all trades.
You can use these financial tips for your sole-proprietorship business and can see your business grow and expand and generate good profits. Your personal income can also grow and be independent of your business as you keep the financials separate. So, use these tips and master your solopreneurship.
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