Starting a business is exciting, but figuring out how to manage your finances? That can be a real challenge, especially for young entrepreneurs. To help navigate these hurdles, we turned to seasoned founders and CEOs for their best budgeting advice. Whether it’s learning to invest wisely, staying patient, or extending your personal financial runway, these experts share six practical tips that will help you make smarter financial decisions and set your business up for long-term success.
- Invest Wisely and Be Patient
- Forecast Cash Flow Strategically
- Simplify and Connect Budget to Goals
- Prioritize Personal Savings First
- Track Finances and Prioritize Needs
- Extend Personal Financial Runway
Invest Wisely and Be Patient
I’m now an eight-figure entrepreneur, so here’s my advice: Don’t invest more than you can afford to lose. That way, you’ll be able to recover if things don’t work out the first time.
With that said, it takes a big investment to build a successful business, and early on, you won’t see results from your efforts.
For years, I thought I would never succeed. But here’s something to remember: It’s normal for success to take time. In fact, I had started a business that flopped about ten years before hitting six figures in four months and having “overnight” success. So, don’t invest too much. But at the same time, don’t worry if it takes you longer than you expected to be successful. Just keep learning from your mistakes and improving your skills.
Luisa Zhou, Founder, LuisaZhou.com
Forecast Cash Flow Strategically
When you’re an entrepreneur just starting out, trying to run a small shoestring company, one piece of advice is to track less money and forecast more. It’s easy to figure out where the money went—and we need to do that, obviously—but checking where it’s going is just as important.
Put together a cash-flow forecast, at least as far as you can see for the next six months. Not because you’re going to spend money—not right away, anyway; not necessarily because you want to plan future spending. But because you want to see where the trends are for the cash coming into and coming out of your business – and that’s what has informed the decisions to scale up, hire, or invest in technology.
This preemptive approach allows you to plan for financial needs before they become urgent, and fend off the cash-flow crunches that can invade the lives of any new business. If you know you have a big expense on the horizon, a quarter or two out, you can start modifying your monthly savings now, or considering credit options.
You will also find yourself thinking much more strategically, looking down the road instead of just at this week or next. Forecasting requires planning for the future, not just the next few days. You need to look for ways to grow and to sustain instead of simply looking for ways to survive.
Eric Croak, CFP, President, Croak Capital
Simplify and Connect Budget to Goals
As a Financial Coach for young professionals and business owners, I’ve spoken to many people about their past experiences with budgeting, and through those conversations, I’ve discovered that attempts to budget fall apart for one of two reasons. Either your budget did not feel simple to maintain, or it was not well-connected to your goals.
Without a simple design and an automated, intuitive tool to help you, it feels like too much of a lift to maintain it, so our brain avoids the task. Without a crystal-clear connection to our goals, it’s not motivating to put in the effort to use it in the first place. There must be some emotional excitement there. But if you can nail these two areas, your odds of success go up dramatically!
Jake Randall, Founder, Wild Freedom Financial Coaching
Prioritize Personal Savings First
I always tell young entrepreneurs to pay themselves first—set aside a portion of your earnings for personal savings and investments before allocating funds to your business. This approach ensures your personal financial stability while you build your empire, and believe me, it’s a game-changer for long-term success.
Adam Garcia, Founder, The Stock Dork
Track Finances and Prioritize Needs
As a former financial advisor and currently serving as General Counsel, I believe the first and most crucial budgeting tip I would recommend to young entrepreneurs is to meticulously track their revenue and expenditures. Unforeseen expenses can pose threats to startups; hence, keeping an accurate record aids in making informed financial decisions. Further, it’s essential to distinguish between “need-to-have” and “nice-to-have.” Prioritizing essential costs over non-essential ones can significantly curb overspending.
One practical example is choosing open-source software over expensive, license-based ones for non-core operations. Lastly, I would advise entrepreneurs to have a clear sales and revenue strategy. Revenue generation should be a priority over product development, as the former would fund the latter. Remember, it’s all about strategic planning and patience for the right opportunities.
Jonathan Feniak, General Counsel, LLC Attorney
Extend Personal Financial Runway
Starting a business is like a construction project; it will take longer and cost more than you think. Try to give yourself as much personal financial runway as possible when starting your business.
For example, if your business plan says you need six months to start turning a profit, plan on nine to twelve months of personal finances to get you through. For folks with high incomes, this looks like saving up several months’ worth of savings. For others, it might mean moving in with family or into a cheaper living situation. It might also mean keeping your 9-5 job until the business makes enough revenue for you to start paying yourself.
Whatever it is, find a way to give yourself as much time as possible to not have to stress about your personal finances while trying to get your business up and running. And if getting on your parents’ or partner’s health insurance isn’t an option, try to find opportunities to get lower-cost health insurance through unions and associations.
Kerrie Carden, Founder & CEO, Equip Advisory
