Entrepreneurs often are driven by passion to bring fresh perspectives to the market. “A lot of entrepreneurs are starting a business because they want to bring something new into the world,” said Ablaze Financial founder and fractional CFO Amy Spandau. “They’re coming at it from a place of creativity.” However, she has found that the biggest roadblock is fear about the financial aspect. “When you work for a company, you have the predictability of getting a paycheck every two weeks, but as a small business owner, you don’t have that same assurance,” she said. “Many entrepreneurs did not become entrepreneurs because they were good at accounting and finance.”

This fear can stop an entrepreneur from starting or lead them to jump in without a safety net. Below are her insights into managing personal and business finances to maintain stability and achieve entrepreneurial goals. “You need to be sure you can win the game you’re playing,” she said.

Prioritize Profit

Profitability is essential for sustaining a business. Without it, the idea — no matter how great it is — will fail. “The only reason you should start a business is because it will make money,” Spandau said. “If you’re trying to build something that brings more freedom for yourself and your family, you need to create a business that drives cash flow as profit drives cash flow.” Engage deeply with the numbers before diving in.

Do Some Strategic Forecasting

To truly understand your financial situation, create a forecasting model. “At the basic level, you need to understand where all the money is coming from and where it’s going,” Spandau said. She advocated putting two years of projections on your calendar to pinpoint exact financial needs and potential shortfalls: “That way, you know exactly how much you need and where the deficits are.”

Forecasting models consider both revenue and expenses. First, forecast your primary sources of revenue. “If you’re a cake shop, you want to consider how to price your cakes and pastries and estimate your daily sales,” she said. For expenses, consider:

• inventory: This is the cost of goods and materials used to produce what your business sells. “Again, if you’re a cake shop, this includes the cost of ingredients like flour, sugar and frosting,” Spandau said.
• labor: “You need to know how many people it takes to run your business, yourself included,” she advised. “If you stop paying yourself, the wheels will eventually fall off.”
• services: This involves costs like accounting and legal fees.
• sales and marketing: Budget for things like website development, brand building, social media and advertising. “Also consider expenses for photo shoots and video shoots,” she said.
• facilities: Factor in rent, utilities and maintenance.
• office expenses: This includes items like postage and shipping.
• travel costs: This means any expenses for business-related travel, such as airfare, accommodations and meals. “If you don’t know how much things cost, you can Google them,” Spandau said.
• contingencies: Allocate at least 10% of your budget for unforeseen expenses. “I can make a model say anything, but things will not always go exactly as planned,” she said. “Make sure you have enough reserves to get you through unexpected challenges.”

Understand the nature of estimates, however. All budgets are preliminary. “Every budget I’ve ever done is wrong as soon as it’s published because we’re always getting new information, but making these estimates is still crucial for planning,” she said.

Keep Cash Reserves

When you’re financially stressed, you tend to make business decisions out of fear and anxiety. That’s why Spandau recommended having “enough money to sit back on” before you hit the ground running. “I encourage my clients to maintain six to 12 months of runway in their business account and 18 to 24 in their personal accounts,” Spandau said.

This buffer allows you to make decisions from a place of confidence rather than desperation. It provides the freedom to take calculated risks, invest in growth opportunities and weather unexpected challenges without compromising your values or business integrity. Maintaining cash reserves also can help you:

• negotiate better deals: With financial stability, you’re in a stronger position to negotiate terms and prices that are favorable for your business.
• avoid high-interest debt: Instead of relying on costly credit options during tough times, you can use your reserves to cover expenses like payroll, rent and other essential expenses during months when sales are slow.
• seize opportunities: When a lucrative opportunity arises, you’ll have the funds available to act quickly.

Seek Professional Support and Leverage Expertise

Entrepreneurs need guidance. “Surround yourself with awesome people that are great at their craft, who can help you be reasonable,” Spandau said. These mentors and advisers provide accountability and can help you avoid pitfalls. “Having someone to run ideas by helps refine your strategies and ensures you’re making informed decisions,” she said. Consider these tips:

• Work with financial advisers who specialize in small businesses. “One of the reasons clients hire me is because they’re like: ‘If Amy’s worrying about it, I don’t have to,’” Spandau said.
• Participate in local or online entrepreneurial communities where you can share experiences, gain knowledge and receive feedback. “Surround yourself with people who are doing the same thing because once you guys open up and start to be honest with each other, you’ll see that you’re not alone.”
• Schedule periodic reviews of your business plan with your mentors or consultants to ensure you’re on track and adapting to any changes in the market.

Commit Fully

Success in entrepreneurship hinges on wholehearted commitment and a willingness to learn and adapt. “If you jump into this, you can’t be wishy-washy,” said Spandau. “You have to really believe. You’ve got to give it all you’ve got.” Committing fully means embracing challenges, staying resilient through setbacks, continually seeking knowledge, refining your strategies and remaining dedicated to your vision. “Being an entrepreneur is one of the hardest things because you are basically leaving your community to do something crazy,” she said. “You’re not making the safe choice. The safe choice is working for someone else.” Mentally, she said, “you’ve got to gear up and suit up and be like: ‘I’m doing this.’”