7 Financial Requirements for Starting a Business
June 7, 2022
1. Find an Accountant
Be honest with yourself: If you struggle to manage (or organize!) your finances, hire a professional who can help you balance the financial requirements of starting a business. They will help you from day one, starting with keeping your personal money and your business income separate. Maintaining a business account will ensure you can stay on top of office expenditures (rent, supplies, payroll, taxes, etc.) without raiding your personal account. It also helps minimize legal liabilities, gives your business credibility and makes tax filings easier.
Plus, an accountant can help you determine the best ways to invest in your business. Should you pay rent on a co-working space, buy a new computer or hire a part-time assistant? An accountant can help you prioritize these smart investments.
2. Erase Your Debt
You can’t invest in your business if you’re burdened with debt payments. Think critically about which balances can most impact your financial standing. Certain debt, such as a mortgage or student loan, typically come with lower interest rates and can be paid off slowly without financial consequences. Large credit card balances, on the other hand, can incur hefty interest charges; pay these down as much as possible before you start your business.
3. Calculate Your Personal Expenses
When you receive a regular paycheck, it’s normal to pay your monthly bills without giving them too much thought. Generally, people adjust their budget so their take-home salary covers their needs and discretionary spending. A new business can mean unpredictable earnings, especially as you get started, so you’ll need to be cautious about your expenses to reach long-term goals.
Add up what you currently spend for essentials (housing, utilities, food, transportation and childcare) and incidentals (entertainment, travel, memberships and other luxury items). Add items an employer may have covered that you’ll be shouldering yourself, such as health insurance or a retirement plan. If your initial projections about monthly earnings don’t cover these, reconsider your budget and reduce your monthly expenses.
4. … And Your Business Expenses
As an insurance agent, you control the ongoing expenses, including insurance costs, office rent, staff compensation, computers and IT help. Don’t forget about your licensing fees and local and state taxes. If you’re unsure of how much these items may cost, chat with an insurance veteran for a rough estimate. The good news: You won’t pay any franchise fees or long-term financial commitments as a Farm Bureau insurance agent.
5. Build an Emergency Fund
Farm Bureau agents earn competitive commissions. At the end of the 2021 tax year, the top 50% of agents earned an average income of $374,650. Regardless, it’s important to be prepared for unanticipated costs. So how much cash should you save up to start a business? We recommend building an emergency fund that covers six months of household expenses. Chances are you’ll never need it, but knowing it’s there will bring you peace of mind.
6. Assess Your Assets
Farm Bureau doesn’t charge franchise fees or ask for a long-term financial commitment. Plus, you only need roughly $10,000 in liquid capital (such as cash at the bank and short-term investments like CDs, bonds, money market funds and mutual funds) to launch your business. Take the time to build your liquidity before assuming business expenses, and you’ll be prepped for financial success.
7. Build a Business Plan
You’ve spent hours researching and taking action on the financial requirements for starting a business. Your business plan is a key next step. The business plan should be a living document, one you revisit regularly to note your successes and shortfalls. And, of course, we’re here to help. As a new Farm Bureau agent, you’ll work with your District Manager to develop a business plan so you can find success as an agent.
Start Your Business Today
Are you ready to launch your business as an insurance agent with Farm Bureau? Contact us to learn more about getting started.