If you are about to outline the world of running your own small business, there are several pieces of advice you would do well to listen to. Provided below are a thorough five points to bear in mind.
1. Remember to Pay Yourself
Many small business owners get so focused on putting all that they can into affording to run the day-to-day elements of their business that they lose sight of being able to earn for themselves. If you run a small business, you need to remember that that means you are also an employee of your company and should be pulling in a respectable paycheck. A good small business is one where the owner’s finances are as healthy as their business finances.
Despite this situation, it is surprising how many small business owners forgo taking a paycheck if only because so many of them feel that running the business and keeping everyone else happy and paid takes priority over their finances; few people start a business to go into personal poverty while helping and employing so many others. Just remember that if you sink all of your earnings into the business, you will be defenseless if the business is a bust.
2. Invest Toward Growth
Since growth means the business can thrive and stay afloat, you should always keep at least one eye on the horizon. Growth allows for innovation and innovation is what allows a company to distance itself from its contemporaries and appear more appealing to customers. Growth also means you can better treat your customers, afford to hire more employees, and push into new branches or entirely new products or services, depending on your specific business. Ultimately, a business that gets re-invested into is a business that will continue to grow.
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3. Do Not Fear Loans
Loans only seem scary because the lender is always going to put a critical eye on your business’s viability and most business owners are paranoid about defending their livelihood. However, foregoing the sort of capital infusion that originates from a loan may hamstring your business when it comes to getting new hires or new equipment. A loan can also be used to bolster cash flow and avoid delayed payments to your employees and suppliers.
4. Have Your Billing Figured Out
It is extremely common to have at least one regular client who is routinely behind on invoices and payments. If you plan to run a small business’ finances, then you are going to have to learn how to juggle the cash flow so that the business can do what it does every workday. If you happen to have one or more of these “colorful” clients, you may need to get inventive with how you choose to bill them.
If the bulk of your profits is locked behind the unpaid invoices from those shifty customers, you will likely run into issues with cash flow; issues with cash flow can lead to foreclosure or even insolvency. If you value the customer’s money enough to keep them around, consider adjusting their contract to a “2/10 Net 30;” this arrangement states that should the customer be late to pay their invoice within 10 days, then you will shave 2% off the total bill. However, if they fail to pay after that 10th day, then they will have to pay the full amount within 30 days.
5. Focus on Your ROI as Much as Your Expenditures
Keeping a clear head on where your money is going and the return on investment can do wonders for assessing the state of a business. A smart business owner will consider the ROI of every expenditure while a bad owner will constantly lose money on pointless or flawed ventures. Understand where the dollars are going and how that is being rewarded and learn to cut back or reverse course if things feel underwhelming.
So there they are, five solid tips for any potential small business. Respect your money, respect yourself enough to self-pay, do not be too proud to take out a loan, manage billing with difficult clients, and always be putting some money toward growth.
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