Starting a small business from your home can allow you more flexibility and an increased level of control over your career trajectory. But no matter how profitable your idea might be, you shouldn’t try to launch a business without a financial safety net in place first. We’ve compiled a guide packed with tips on safeguarding your company’s finances. Let’s dive in!
Establish an LLC
By converting your business to an LLC, you’ll secure your personal assets in case of legal or financial issues and qualify for tax benefits to maximize your profits.
While you could hire an attorney to assist you with the filing process, working with an online formation service instead is a great way to save money.
Prioritize Your Emergency Fund
The COVID-19 pandemic demonstrated the importance of maintaining an emergency fund so that your business can weather wide-spread economic turmoil. You should prioritize saving for your emergency fund over all other short-term financial goals. To build your emergency fund, Morgan Stanley recommends opening an online savings account with a high interest rate and saving enough money to cover anywhere from three to six months’ of living expenses.
Select the Appropriate Insurance Coverage
In addition to establishing an emergency fund, choosing the right insurance coverage for your home business will grant you peace of mind. When selecting an insurance policy, factor in the risks associated with your particular business model. If you need additional protection that a standard policy can’t provide, consider enrolling in comprehensive and umbrella policies.
Add A Layer Of Protection With a Home Warranty
If you’re running a business from home, dealing with expensive home repairs can hinder your operational strategy. Investing in a home warranty can help you save money over time while providing much-needed protection against the financial burden of major repairs or replacements due to wear and tear.
Home warranties often cover repairs for appliances, HVAC systems, and plumbing systems, which could otherwise cost thousands if something were to happen without this coverage in place. Additionally, some providers offer discounts on premiums if multiple items or systems within the property are covered by the same warranty provider. Take a look at your options and choose the best warranty for your needs.
Track Your Cash Flow
Monitor your inflows and outflows of cash and continuously assess your credit usage to ensure you’re maintaining a healthy cash flow. To get a big-picture view of your cash flow, prepare periodic financial reports, and review them regularly. If you notice any problems, you can take corrective measures right away.
Build a Risk Management Plan
With a risk management plan in place for your business, you can identify and address potential risks early on. For example, The Business Backer states that cyber attacks and high employee turnover are pressing concerns for many small enterprises, so ensure that you have plans in place to address issues like these.
With a financial safety net for your small home-based business, you’ll have funds to fall back on in the event of an economic downturn. Furthermore, you’ll be able to make long-term, strategic decisions about your company’s future.
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