Before embarking on a business venture, women entrepreneurs should prioritise a thorough financial assessment. It’s imperative to evaluate how to manage the expenses involved. Determine if you possess the necessary funds or if seeking financial support is a viable option. For those contemplating leaving their current employment, it’s essential to secure a substantial savings cushion to ensure self-sustainability until the business blossoms into profitability.
Calculate Your Startup Costs
Many startups face challenges and even fail due to running out of funds before becoming profitable. Calculating your expenses is a critical step in starting a business. It’s advisable to err on the side of caution and overestimate your startup capital because it often takes time for a business to start generating sustainable revenue.
One useful tool for understanding when your business, product, or service will become profitable is a break-even analysis. The formula for this analysis is as follows: Break-Even Point = Fixed Costs ÷ (Average Price Per Unit – Variable Costs). This analysis provides valuable insights into the minimum level of performance required to avoid losses and assists in setting production goals based on profit generation.
Here are three key reasons to conduct a break-even analysis:
Determine Profitability
Calculate the revenue needed to cover all your expenses. This analysis helps you identify which products or services are profitable and which ones result in losses.
Price a Product or Service
Consider fixed rates, variable costs, total costs, and the cost of physical goods or labour when setting the price for your products or services.
Analyse the Data
Identify opportunities to reduce fixed costs, lower variable costs per unit, and improve sales to reach profitability.
Monitor Your Expenses
Avoid overspending when launching your business. Be mindful of purchases that align with your business goals, and steer clear of extravagant equipment or expenses that don’t contribute to your objectives. Vigilantly track your business expenses to ensure you stay within your budget.
Explore Funding Options
Securing startup capital is a critical step in launching your business. The funding options available to you may depend on factors such as your creditworthiness, the amount of capital needed, and the available opportunities. Here are some funding options to consider:
Business Loans
Explore commercial loans from banks or consider small business loans from the Small Business Administration (SBA) or alternative lenders.
Business Grants
Research and apply for competitive grants that align with your business situation, such as grants for minority-owned, women-owned, or government-related businesses.
Angel Investors
Attract angel investors who can provide substantial funding in exchange for an active role in your business.
Equity Crowdfunding
Launch an equity crowdfunding campaign to raise smaller amounts of money from multiple backers using specialised crowdfunding platforms.
Choose the Right Business Banking Partner
Selecting the right bank for your business is crucial. Consider smaller community banks that understand local market conditions and are more inclined to work closely with you based on your business profile and character. These banks prioritise building personal relationships and can offer quicker decision-making compared to larger banks that rely heavily on credit scores. When choosing a bank, evaluate what matters most to you and your business needs, and schedule meetings with different banks to find the best fit.
Conclusion
Assessing your finances, conducting a break-even analysis, monitoring expenses, exploring funding options, and selecting the right business bank are all vital steps in ensuring financial stability for your new venture. Proper financial planning and management are essential for the success and longevity of your startup.
