If you are just starting out on your e-commerce business, it makes sense to keep a watchful eye on your budget. But for many new entrepreneurs, starting and getting business off the ground is more than just the business’ cash flow: at this stage, many entrepreneurs feel vulnerable for their finances, and it’s especially true if they decided to quit their job already and take their business full-time.
In this article, we are going to discuss some tips on how you can manage your money while you’re still struggling to take your business off the ground. And while this article is written for new entrepreneurs, seasoned entrepreneurs can also take some lessons here.
That being said, let’s not take this any further and let’s get started!
5 Tips on How to Manage Money for New E-Commerce Entrepreneurs
1) Budget, Budget, Budget!
Whenever we talk about personal or business finance, the word “budget” will always pop up. This is because budgeting is perhaps the very basic of personal or business finance.
Set a budget for both your personal and business finance. How much are you earning right now (presumably, from your current job)? If your business is early earning some income, how much is it? From there, consider your expenses: what are your personal and business expense? Will they go beyond what you’re earning?
Once you monitored your income and expenses, set a budget that will keep your income and especially your expenses in check. If at all possible, live below your means so that you can save up some cash which you can use as a buffer should things go wrong. You can also use your extra savings as a reserve for your business in case it’s needed. Above all, stick to your budget. Budgeting means nothing if you will keep breaking it.
By the way, since we’ve mentioned about saving, let’s talk about that in the second point!
2) Have Enough Savings Before You Quit Your Job
When to quit your job is worth another article, but if you are planning to quit your job to make your business full-time, be sure you saved enough money before doing so.
Ideally, have a savings that can float you through from 6 months to a year. But above all, going back to point #1, stick to your budget. Remember, if you blow up on your budget, you will shorten your savings’ lifespan. Of course, outside factors can blow up your savings (e.g. emergencies, increased cost of basic necessities, etc.) But whenever possible, stick to your budget while you trying to make your business profitable.
3) Downsize Your Lifestyle (Temporarily)
Aside from saving, we highly recommend that you downsize your lifestyle during this period. And yes, this may mean cutting off expenses that are not necessary but you may want. Some of such expenses include TV cable, unnecessary internet subscriptions, too much grocery items, and so on. Basically, live only based on what you really need and forget about the luxuries – at least, for now. The beauty of this is, once you become successful in your business, you can get upgrade back to your old lifestyle, or even go higher than that!
That being said, keep in mind that income-expense relationship is relative. If you’re a seasoned entrepreneur with highly profitable business and yet, you’re still struggling with your finances, it could be because you’re living a very expensive lifestyle that goes beyond even your large profits. So, be sure that you’re expense and lifestyle stay within or below your income.
4) Do Not Spend on Unnecessary Expenses for Your Business
This may sound like no-brainer, but if we’re not careful, we may end up spending a lot more than we need. Not necessarily on e-commerce and retail businesses, but there are tales of business that has an unnecessary huge expense (which unnecessary takes away a lot of their income) – some of them even go unnoticed. For instance, some businesses have two offices when they only need one; some rents on a bigger warehouse space when they barely use half of the space; some spend on marketing campaigns despite the campaigns not giving them a decent return (bad marketing, that is). And don’t think that your toilet paper or bond paper are just small expenses – if you’re not careful, those “tiny” expense may balloon up without you even noticing it.
The lesson here is to be mindful of your business expense. Before you expand or spend on new expenditures, be sure that they are justified enough. Also, keep an eye on your business cash flow to see if some expenses are unnecessary or unnecessarily high – and cut or lower those expenses.
5) Know Your Business’ Actual Cost and Expenses
In many businesses, the actual cost and expenses are pretty much straightforward – in other words, you’ll know your costs and expenses right away. For example, a baker would know his or her cost right away – the rent, ingredients, employees, etc. A freelancer will also know his or her upfront costs – website registration (if he or she opted to have his own website), business cards, premium freelance services, etc. However, this is not the case for e-commerce businesses.
One of the tricky expenses in e-commerce business is the customs fee and other costs that may be “hidden” from you (and we’re not even talking about tax yet, which varies from country to country). The good thing is, fulfillment companies like Fulfillmen (yes, we’re here for you!) can help you see those costs so that you’ll have an accurate view of your business’ cash flow. Still, take the time to learn the ins and outs of fulfillment costs. Once you learned the ropes, it will be relatively easier for you in the months to come!
Hopefully, after reading this article, you’ll have a good insight on how to manage your money as a new e-commerce entrepreneur. With proper budgeting and if you have enough savings, money could be less of an issue for someone who’s just starting his or her business out.
If you are to take the journey of e-commerce entrepreneurship, we hope that you find it fulfilling and lucrative! If you need any help for fulfillment, Fulfillmen is always here for you. You can reach us out and we’ll be on touch with you for your concerns!
Also, if you are a new entrepreneur, you may want to check this article, too: 5 Truths About Starting an E-Commerce Business That New E-Commerce Entrepreneurs Should Know
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