Starting your own business? Ask these financial questions first.

Starting your own business can be an exciting undertaking! And, if all goes according to plan, a prosperous one. However, research shows that only half of new businesses last longer than five years – an indication that careful planning and preparation is required if you want your business to make it in the long run.

Once of the key aspects of starting a new business is the financial aspect. Whether you are going it alone, working with partners, or hiring a financial team to manage your books, as a new business owner, you need to pay close attention to all financial matters at all times. If you are unable to manage aspects such as cash flow, for example, your business will not survive even with the best concept in the marketplace.

Six financial questions to ask before you start up:

1. Where will the money come from?

Do you have enough capital to invest in starting your business? Are you working with partners or taking a loan from a family member or an institution? Every way of raising funds for a new business comes with advantages and risks, and a combination of these might be required to see your business come to life. It’s important to understand the repayment terms, obligations, and responsibilities involved in each kind of investment to avoid any issues down the line.

2. What is my cash flow plan?

Cash flow involves balancing what comes in with what needs to leave your business to keep it alive. While it is difficult to pinpoint how much money you are going to make in a given month, especially at the start, you can work on estimates. When it comes to income, it is a good idea to keep these conservative. Rather a happy profit surprise that a frightening debt at the end of each month.

3. What are the running costs?

In simple terms, costs for a new business can be divided into two categories – start up and ongoing costs. Tackle start up costs before you even begin trading – what will it cost to get the business off the ground and to start operating? Any essential once-off purchases that must be made? Then work out what you will need to pay out every month to keep the business running – consider overhead costs such as rent, salaries, hardware, and software. And don’t forget annual expenses such as taxes. Be as specific as you can to get a clear idea of what you will need to bring in every month.

4. Where do I see my business financially in two, five, and ten years’ time?

When it comes to financial matters, it is smart to take a long-term view and plan accordingly. Set goals for your business – how prosperous do you want to be over the next few years? What will the business’ finances look like as time goes on? What do you need to do now to achieve this vision of prosperity?

5. Do I need an emergency fund?

The answer is probably yes. Just as in your personal life, you need to establish an emergency fund as soon as possible so that your business has a financial cushion to fall back on should unexpected costs arise. Accidents and mistakes happen and they can be costly. Better to be prepared (with at least six months’ worth of funds set aside) than blindsided by a large bill. It is also wise to protect yourself and your business against the unexpected with adequate and suitable insurance products.

6. Can I survive financially while working on this business?

Too many enthusiastic entrepreneurs end up putting their own financial stability and future at risk for the sake of a business idea. It is best to separate your personal and business finances but where this is not possible, it’s important to have a plan in place for protecting your personal finances now and into the future.


Paying close attention to the financial aspects of your business from the very start will pay off in the long run. Need help working it all out? Talk to  a professional financial adviser who can help you put together a financial plan for you and your business. Talk to us – as independent financial advisers, we specialise in the finances of working professionals and enjoy helping our clients achieve their financial dreams.

Need a financial plan for your business? We can help!