There are many advantages to starting your own business. You can gain financial rewards, independence, and have the freedom to be creative. However, there are many risks involved. Thousands of small businesses close each year in the country. While there are multiple reasons for this, the most common denominator is inadequate planning.
As a small business owner, you can take some early steps to ensure that your business survives its first year and reaches its potential by growing into a thriving enterprise. These tips can help your small business stay cash flow positive:
1. Control Your Expenditures
As a small business owner, it’s important to keep your expenditures in control, especially when your margins are razor-thin. Review your expenses and minimize your costs by eliminating unnecessary expenses. Get the best price on your supplies and ask for discounts when your company grows, and your orders increase.
Make sure that your employees know that frugalness is a company policy. Remember, it all adds up. At the same time, avoid penny-pinching. For example, the cost of maintaining an office coffee machine is worth the boost in employee morale and performance.
2. Maximize Your Revenue
Improve your market reach. A larger customer base will boost your revenue. Think outside the box by taking advantage of targeted social media marketing. Also, conduct market research to set the ideal price for your products. If your price is too low, then you’ll lose revenue. Alternatively, a higher than market price will lose customers.
When launching new products, test them on new customers by offering them at discounted prices. This will not only help you test the market, but it will improve customer loyalty.
3. Follow Good Invoicing Practices
Most invoices don’t get paid on time, so be proactive. Send your invoices on time and follow up with polite reminders. Make sure that they’re detailed and correct to avoid time-consuming delays. Train your team to use the latest invoicing software to improve the efficiency of your collection process.
You can use early payment bonuses and late-payment fees to incentivize timely payments. Requiring deposits can also improve your cash flow. Consider developing a friendly relationship with the accounts payable department at your biggest customer to get paid faster.
Accept many payment options such as checks, electronic bank transfers, credit cards, and e-payment solutions, and make sure that these options are available on the invoice.
4. Get Your Financing Sorted
Many small businesses close because of temporary financial setbacks. Your projected revenue three months down the road won’t be worth much if your business isn’t around to take advantage of it. Have the reserves to survive financial turbulence.
Make sure that you raise enough capital before starting your business. A crowdfunding campaign, bootstrapping, angel investors, and family can help with the fundraising. You should also consider utilizing the services of an alternative funding provider that specializes in financing small businesses with smart funding solutions transparently and reliably.
While it’s exciting to start a small business, it’s also easy to run into financial hurdles. By following these four tips, your business can improve its cash flow and increase its chances of becoming a successful enterprise.