According to a study by Upwork and Freelancers Union in 2017, the U.S. workforce is predicted to become majority freelancers, or small business owners in the next decade. Since the IRS views freelancers, as self-employed, they must file as business owners.
In a recent online poll conducted by the National Foundation for Credit Counseling® (NFCC®), it found similar findings. Most respondents have dreams of going into business for themselves. Among the responses, 40 percent indicated that they aspire to open their own business while an additional 18 percent would consider the possibility if they had access to the right resources.
When the economy is strong, the possibilities for success in the open marketplace are quite a temptation for people with an entrepreneurial spirit. Putting those ideas into action means making some smart financial choices.
To help guide some of the early financial decisions that are involved in starting a new business, here are some tips to consider:
Get the bucks in a row – It is very important to keep personal finances on solid ground in order to give the financial matters of the business all the attention they deserve. Creating and maintaining a budget for household expenses is the first step. Financial challenges like past-due credit cards, auto loans or mortgages should be dealt with right away by communicating with the lenders and with a nonprofit financial coach.
Create a business plan – Creating a business plan helps entrepreneurs achieve important goals. The most comprehensive business plan serves as a roadmap for launching a successful business venture that leads to the achievement of financial goals. It can also be a useful tool for attracting support from banks and investors.
Build a financial firewall – Keeping business and personal finances separate will go a long way toward ensuring success for each area. Personal sources of funding are sometimes used to cover startup costs in the early stages, but it makes better sense to maintain business checking and business credit card accounts as the enterprise grows. This action also creates a paper trail for business income and expenses that can be helpful at tax time.
Seeking advice from an NFCC small business owner coach can help address financial challenges associated with small business ownership.