One of the big roadblocks for some individuals starting a new corporation or LLC business is their self-assessment about lacking financial expertise. But an entrepreneur can hire financial professionals for the detail work. There are only a few matters that you should monitor as a business owner in order to effectively manage the financial affairs.
The first basic function of entrepreneurial oversight is pricing. You need to review the market signals sent by price. When your price is too low, you sell a lot but don’t have enough revenue to cover costs. If your price is too high, you don’t sell enough volume and have the same problem.
You need to examine the prices of your competitors. Develop a marketing strategy based upon the factors that differentiate your business from the competition. You may need special promotions, coupon offerings, and closer contact with customers.
A new business doesn’t always involve a patented product that enjoys pricing power. Solo operations and home-based businesses get information about price from their customers. This doesn’t require a great financial mind for an entrepreneur. It only means that you have to track customer satisfaction and learn why they purchase from your business.
The flip side of monitoring price for output is awareness of input costs. This is usually as simple as limiting shipping costs and obtaining products for resale at reasonable cost. For some industries, purchasing involves limiting spoilage or stale merchandise that won’t sell quickly.
The other costs to monitor are the major categories of overhead expenses associated with your particular industry. For labor-intensive industries, this means reviewing the cost for employees. A commonly utilized measurement is revenue per employee.
There’s another financial control you exercise in the growth of a new business. That involves your policy and results regarding credit and collections. Extending credit to customers is important. Bills are frequently delivered after merchandise is shipped or services rendered. You only need a system for deciding credit limits. For some customers, you may require a deposit or retainer.
Don’t let your inexperience with accounting and finance inhibit your start of a new business. There are plenty of professional resources to help you maintain financial records. To operate a Corporation or LLC only requires a little money monitoring skill.