5 Money Tips That Will Help Small Business Owners Stay Solvent
As a small business owner, obstacles and challenges are a part of your daily landscape. It takes a certain amount of grit, stubbornness, and optimism to stay the course. This often translates into staying positive and hoping for the best. But do not let too much optimism blind you from ways you could be running a leaky ship. Some statistics show that 96 percent of businesses fail within their first 10 years of business. Prevent that from happening to you.
Here are some tips that will help you tighten your belt where needed:
1. Readjust your budget.
Are you always in the red at the end of the month? Chances are your budget is not doing what it should. In the beginning, lean years of a business, your budget needs to be based on your revenue—how much you are making. In the future, when your business is making millions, you can think about having a budget for renovating your break room. Or other enticing non-essentials. For now, your bills should go to rent, utilities, and any manufacturing costs, along with reducing any debt your business has.
2. Keep your personal finances separate.
Do you find yourself paying out of your own pocket to help tide your business over? Tax season is going to be a headache for you. And in a worst-case scenario, you could be putting your personal savings at financial risk, beyond what you are willing to invest in your business. Some tips to keep personal and business accounts separate? Have separate checking accounts. Open an account with your bank where all business profits go. Have a business credit card for business expenses, etc. You get the idea.
3. Get outside help when needed.
Certain situations call for outside help and are worth the money spent on retaining their services. If you have accounts that have not been paid, or if your business has been awarded a legal judgment, hiring judgment recovery services is a smart move. Other instances of times when spending money could help you save money include hiring an account to help you file taxes for your business.
4. Stop counting on future money.
It is fine to hope for profit, but the only money you can truly count on is the cash in your tiller at the end of the day. You’ve probably heard it before, but it is worth repeating… Do not spend money you do not have. This is the easiest way to avoid falling into small business debt or spending too much on frills that are unnecessary. Things like fancy office equipment, or funky art deco pieces. Trim the fat by not buying anything that does not directly contribute to consumer growth. You may need to cut in other areas, too. Advertising and marketing costs that fail to hit the mark are also often to blame for businesses going in the red.
5.Don’t fall into the borrowing trap.
Cash flow is often the number one problem that small business owners have. An easy out is to borrow money to tide a business through a dry spell. But such reliance on borrowing can balloon your debt and give you a hefty monthly repayment burden. And for businesses that can’t get a bank loan, avoid alternative lenders. Alternative financing options, such as peer to peer lending and working capital loans, may seem enticing. This is often because you aren’t required to have flawless credit or go through months of red tape. But experts warn that short-term loans can lead to a harsh cycle of repayments that can be hard to shake. So what can you do to guard yourself against debt? Don’t let your focus on growth cause you to purchase things out of your budget. Doing so is a sure trap. Strip your operation down to the essentials until your profits allow you to budget for those extras.