With so many job losses and a great deal of uncertainty over the future, it seems like more and more people are considering starting their own small business or freelancing, instead of working for someone else.
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But this doesn’t mean you will automatically be a success in business. Even with the best business idea and enough interest to get it off the ground, success can come down to something many entrepreneurs don’t think about until it’s too late -- money management skills.
How are your financial skills? If you are considering starting a small business, perhaps after a job loss, you need to be able to plan for this change. You can actually learn a lot from your past history with money and your current money management habits –- it doesn’t even matter if you have never managed a business before.
If you are lousy with money in your personal life, then you aren’t suddenly going to become a superb money management fiend in your business life. Whatever habits you have, they could influence the way you perform your activities. So sit down and think about your financial status, whatever situation you might be in. If you are good at juggling bills, multi-tasking and making ends meet, then you’ll be able to use those essential skills to help your business as well.
How good are you at planning? What have you done in the past when you got a pay raise? Did you take it down the local bar and celebrate with it? Did you decide to blow it in Las Vegas or use it for stock and options trades? Or did you sit down and figure out how that money could best be used in the important areas of your life? If you've successfully invested it in mutual funds with a cheap online stock broker, then you're steps ahead of a lot of people.
Starting a new business is another form of investing. Managing money and balancing the books are essential skills if you want your business to be a success. However, even if you don't have these skills at the moment, this doesn’t mean you can't be successful in business. After all, you can always hire someone else to make those decisions. A partner in business could be an option here, but it should always be someone you trust and can work with.
How well will you run your business? The key element to remember is that your financial skills and habits should be strong enough to see you through both good times and bad. For instance you might find that having a large amount of surplus funds in your business bank account is just as stressful as having very little cash at all.
If you've got too much cash lying around, you may find yourself facing a lot of these questions: How much of it can you spend? Where should it be spent? How can you invest it for the good of the business? Perhaps you should think about expanding the business? And if you're short on cash, you may find yourself relying too heavily on your prime credit cards or personal loans for liquidity.
Someone with strong financial habits will be in a better position to cope with extreme financial situations such as cash flow problems or perhaps large amounts of money on deposit. Whatever your business life throws at you, you will be able to deal with it. It can be very different if you have little or no money management skills at all.
Some final points to consider Determining how you'll be handling things financially is one of the most important aspects of setting up your own business. If you don’t think you have the right traits or financial habits to take you forward into a new business, then you may want to think twice before quitting the nine to five or better yet, you may want to build your financial skills before taking a leap into the unknown. You should work to identify your weak points and eradicate them before deciding to go solo.
Silicon Valley Blogger is a full time blogger and online entrepreneur who writes for The Digerati Life and The Smarter Wallet sites that cover general personal finance topics ranging from investing and saving to credit and debt management.