In an era marked by significant career transitions, more individuals are choosing to leave their day jobs to pursue the allure of entrepreneurship.
A study by the Global Entrepreneurship Monitor reveals a rising trend in early-stage entrepreneurial activity, reflecting a broader movement towards self-employment and business creation.
However, enthusiasm and a great business idea are not enough. Most new entrepreneurs, especially those venturing into business for the first time, lack fundamental financial insights, particularly in cash flow management. This oversight can be critical, as understanding and planning financial inflow and outflow is essential for business survival and growth.
Before you even consider resigning from your current job, it is crucial to meticulously plan your business finances. Start by calculating all potential expenses: on a personal level (rent, supplies); as well as on a professional level (marketing, technology, software, your salary, etc). These calculations should reflect the specific obligations linked to your chosen business structure—whether you opt to operate as a self-employed individual (“indépendant”) or establish a company (“SRL”) in Belgium.
With your expenses clearly outlined, you can then determine the monthly income needed to cover these costs. This step is often overlooked, leading many to set arbitrary pricing without a strategic foundation. For instance, in Belgium, if you aim to sustain your living through your business, you will find that you need to generate at least €6,000 per month, including VAT.
Once your expense baseline is set, the next step is to ramp up to €8,500 per month. This increase will facilitate a transition to a company structure (SRL), offering significant tax benefits—lowering your personal tax obligations (IPP) from around 50-55% of your profit as an “indépendant” to about 20% as a company owner. Companies have additional tax obligations, such as corporate tax as well as potential dividend tax. However, it is generally advised to think of a business and pricing model that allows for higher recurring revenue to be able to transition to an SRL as early as possible rather than staying at lower pricing models as an indépendant - which often ends up consuming a lot of time, energy, and tax money for not sufficient financial return on investment to efficiently finance one’s life.
With these financial targets in mind, define a business model and pricing strategy that will efficiently meet these goals. Consider the scale of your sales; selling 6 items or services a month at €1,000 each is generally more manageable than hundreds of transactions at lower prices.
In conclusion, before you make the leap into entrepreneurship, ensure you have a robust financial plan and forecast. Understanding and planning for cash flow isn’t just a precaution—it’s a strategy that differentiates between a dream and a viable, sustainable business. This preparatory step could be the most crucial investment in your entrepreneurial journey.
Alix Rufas
