How to Plan Your Finances Before Starting A Company in Dubai
For new entrepreneurs, personal finances are often tied to their company’s success. Before their venture hits the ground, they must have plan finances to cover their expenses until the business becomes profitable. Or else, they will have to divide their attention between growing the business and finding capital.
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Tips to Plan Finances Before Starting Company in Dubai
Things are no different in Dubai. Here also, new founders are always struggling to balance financial planning and business development. If you plan on starting a company in Dubai, here are a few handy tips to get your finances in order.
1. Separate Your Personal and Business Financial Goals
It’s vital to define your personal financial goals separately from those of your business, particularly for sole traders and family businesses where the two can easily blur.
For instance, if your goal is to save for your children’s house deposit or secure a comfortable retirement, be cautious not to let your business expansion plans interfere with these personal targets.
Likewise, don’t rely solely on your business’s success to achieve your personal financial goals. Many believe selling their business will fund their retirement, but unexpected customer preferences or difficulty penetrating the market can easily disrupt this plan. If so, before you set up your business, onboard a financial planner to help you develop contingency plans to protect both your personal and business interests.
2. Do a Quick Financial Assessment
Before fully committing to your startup, you should evaluate your financial position first. Begin by reviewing current expenses. Since your income may fluctuate after you launch your business, identify areas to cut back right now, so that you can manage potential dips in earnings later.
Next, look at your debts. If you’re a new founder, you probably quit your 9-5 job to go all in on your business. If so, you should create a financial plan to address any outstanding debts, especially when transitioning from a stable job.
Review and revise your budget such that it accounts for reduced or irregular income during the early stages of building the business. Also, consider building an emergency fund to cover unforeseen expenses like car repairs or medical bills.
3. Make a List of Potential Costs
This goes without saying—most startups close shop within the first year. More often than not, the reason is because they didn’t account for all potential expenses beforehand. If you want to avoid the same fate, create a detailed list of costs you’re likely to incur when you launch your business. Be thorough with your projections regarding:
- Licenses and Professional Fees: Costs for licenses in the UAE vary depending on the nature of your business, number of company partners, number of approvals and sanctions required, and your office space rent.
- Wages: Evaluate your staffing needs before you hire an employee because you must pay a specific visa fee. There’s also an attestation fee for document verification by the UAE embassy in the employee’s home country and the UAE Ministry of Education.
- Taxes: All UAE businesses earning an annual revenue in excess of AED 375,000 must now pay a fixed 9% corporate tax on their net profits. Hire a tax consulting firm such as Oblique Consult to check your eligibility for corporate taxation.
- Initial Equipment and Software: Decide whether to buy or lease essential equipment, like machinery or vehicles, and include shipping and installation costs. Also, consider the price of any specialized software.
- Commercial Space and Utilities: Research current leasing rates per square foot in your desired location and plan for future growth. Create a budget for installation expenses.
- Inventory Costs: Estimate the costs for raw materials and packaging based on required units. Factor in the shipping and storage fees as well.
- Marketing Expenses: Set aside a budget for website creation, graphic design, printed materials, digital advertising, and trade show displays.
4. Look for suitable funding options in Dubai
Dubai’s business landscape is dynamic, and therefore, provides easy access to a variety of financing solutions, whether you are launching a startup or looking for funds to expand an established business.
Below are the top 5 financing options for businesses in Dubai:
Crowdfunding
Crowdfunding leverages online platforms and social media, so you can gather contributions from a global audience. Eureeca, Dubai Next, and Beehive are a few notable crowdfunding platforms in the UAE.
Local Funding
Local funding initiatives, or SME loans in Dubai, support the growth of small and medium-sized enterprises and focus on key sectors that align with the UAE’s economic diversification strategy
Angel Investors
Angel investors are high-net-worth individuals with prior entrepreneurial backgrounds. Popular angel investor networks in the UAE include WOMENA, Dubai Angel Investor Network, and Falcon Network.
Venture Capital
Venture capitalists in Dubai target high-potential startups and provide capital in exchange for equity stakes. These investments are primarily directed toward innovative sectors with the potential for substantial returns, though not without risks.
Business Incubators
Business incubators in Dubai offer essential resources such as funding, shared services, mentoring, office space, and networking opportunities. They also provide expert advice and community support that helps startups choose the best business direction right from the start.
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- Dubai Mainland and Free Zone: Which is Better for Company Formation?
Wrap Up
Entrepreneurship is exciting, but it’s never easy. Follow the above tips to stay on top of your finances from the get-go. Also, consider taking professional advice from an accountant to be better able to focus all your energy on your startup.