Giving Your Micro Business a Strong Start
Running A Micro Business
When you start your micro business, the goal, at first, is to make enough money to pay all your bills and to stay in business. Ideally, you’ll grow over time, bringing in enough money to live comfortably, to save for your future, and to be able to pass on something to your family or loved ones.
But, the reality is, a lot of micro business owners struggle with the same common issues:
- Getting overwhelmed by debt.
- Not having enough to make up for the benefits you lose when you aren’t an employee, like the Super Guarantee, workers’ compensation, and paid holidays.
- Being vulnerable to risk – without adequate insurance for things like liability protection, income protection, and the right amount of cover for your business assets, an accident, mistake, or anything else outside of your control can put you out of business practically overnight.
Instead of getting into financial trouble before you have a chance to get your micro business off the ground, set up a strong foundation for your business to stand on.
For a strong financial start, you can:
- Reduce or eliminate your personal debt like credit cards, vehicle financing, or any personal loans before you leave your current job and lose your steady income.
- Save up an emergency fund to cover your living expenses for at least three to six months before flying solo in the gig economy. This will help you stay out of debt if you run into trouble or unplanned expenses. More importantly, it will give you peace of mind.
- Do a risk assessment. Or have a financial professional help you out. What types of insurance protection will you need to protect your business and your income against life’s surprises?
For a strong business start, you can:
- Follow experts in your industry on social media. Read trade magazines. Connect with a mentor. Learn everything you can to gain insight into running a micro business in your niche. You’ll also likely gain inspiration.
- Research your market. Are you selling your products locally or to a wider market? How saturated is the market? How are your services differentiated from others in your niche?
Make a business plan to map out your path to success.
Making and Sticking to Your Business Budget
Along with your business plan, you’ll need a set budget. Together, these two assets will help to guide your micro business and keep it on track.
With a budget, you can see where your money needs to go every month for fixed expenses and what you have left over for purchasing new materials, taking advantage of a sudden marketing opportunity, outsourcing for some help with your customer service, or other costs.
What’s in a budget?
It should include your revenue, your costs, and your profits – which is the extra money you may have to make extra purchases for your business or to increase your own take-home profits.
This can be tricky as your business revenue will likely fluctuate. Do your best to estimate a realistic income when budgeting for the future. Compare your estimated revenue to your fixed costs, like any business loan payments, insurance premiums, costs for utilities or services you use to run your micro business. These are the expenses that you’ll have every month and that remain relatively flat.
Next, look at your variable costs, such as buying more inventory or tools you need to do your work. You may have semi-variable costs that fluctuate with the flow of business, such as paying contractors for services that you are outsourcing, shipping or transportation costs.
And, finally – your income. You are running a micro business to make a profit and have an income to take home. What is left over in your budget after you factor in all your business costs? Do you have enough to cover your personal expenses, including putting away a percentage of your income for taxes, personal super contributions, and to save extra money so you always have a financial cushion?
When you have a budget in place, just like with your business plan, you have a roadmap to use so you know exactly where your money is going and where it is coming from. Your financial decisions are then black and white – you only purchase something that’s in the budget. This will prevent you from overspending, coming up short on bills you need to pay, or falling into debt.
There are plenty of budgeting tools available for self-employed micro business owners, ranging from free options like Money Smart’s TrackMySPEND to paid tools like Xero and QuickBooks