Some of the trends you can’t afford to ignore this year? These 5 business financial strategies.
By Ryan Ayers
Being an entrepreneur is tough, especially since it’s never been easier or cheaper to start your own business. It may be easier to start than ever before, but it may be tougher to thrive in today’s current competitive startup landscape than it was in the past. Cutting through the noise of online marketing and finding your audience is key.
With that in mind, it’s incredibly important to use every competitive advantage you can to keep your company growing and surviving some of the inevitable economic changes like slower job growth that impact small businesses.
1. Proper Planning = Effective Scaling
One of the biggest responsibilities business owners have is smart scaling. It’s relatively easy to manage your business when it’s small since there are fewer layers and moving parts involved to create opportunities for error. But once you start to grow and scale your business, you have to find the right people to take over some of your responsibilities, manage your company’s finances intelligently, and make smart investments.
Effective scaling takes proper planning on all fronts, including the financial side. There are lots of great planning tools for scaling businesses out there to help, and you should never hesitate to ask for help from an expert if you need it. In fact, you may need to hire someone to help you plan your finances during expansion, to ensure that you don’t spend yourself into a hole and lose the business, rather than expanding it.
2. Skip the Credit Debt
As an entrepreneur, you have lots of options when it comes to getting funding. Traditional investors, small business loans, angel investors, money from individuals, and crowdfunding are all viable ways to raise capital for your business.
But while each business owner is in a different situation and each startup has different capital needs, it’s best to avoid using credit card debt to fund business activities whenever possible. The interest rates are often sky-high, and it’s easy to get into trouble with them—much like personal credit card use. If your company needs funding, skip the credit card debt and look to other options.
3. Business in the Front, Personal Funds in the Back
When you’re first starting out, it can seem unnecessary and even intimidating to treat your business like a business and yourself like an employee. When it comes to your business, however, it’s best to separate things as soon as you can.
Establish separate accounts for your business and personal needs. You should pay yourself from your business accounts and leave the remainder for growth and business expenses. It’s also much easier to do your taxes if you keep your accounts separate and it will be easier to protect your own assets should something go wrong.
4. Find Your Mentors
Going it alone as an entrepreneur is never a good idea. You can learn a lot from the people who have come before you and (hopefully) avoid making the mistakes they made.
It’s very important not to make assumptions when it comes to your business’s finances. Consulting with an expert on different aspects of your company’s finances can help you stay lean and smart, as well as often preventing serious financial trouble. This is especially important when it comes to taxes since business taxes are much more complex than personal income tax.
As you build your network, find your mentors. Ask questions. Seek out people with more experience and financial know-how. It’s better to ask questions now than to find yourself in financial trouble later.
5. Stay Loose, Stay Liquid
Cash is king, as they say. One financial guarantee is that you’ll have unexpected hard times or expenses from time to time. If you anticipate this before it happens, you’ll be more likely to get through it and move on without too much trouble.
It’s very important to stay flexible and expect the unexpected. Keep some liquid cash around for emergencies and be prepared to pivot, cut, or otherwise make changes should the economy shift or your equipment break or you lose your best client. If possible, keep 6-12 months of business expenses in the bank at all times and make sure you’re properly insured. It could just mean the difference between success and failure one day.
In a Competitive Environment, Smart Financial Management is Key
While it’s important to invest in your business and spend some money, it’s absolutely essential to take money seriously and to know exactly where it’s going. In a competitive environment, you don’t have much wiggle room and you’ll need to practice smart financial management. When in doubt, turn to the experts!
Ryan Ayers is a researcher and consultant within multiple industries including information technology, blockchain and business development. Always up for a challenge, Ayers enjoys working with startups as well as Fortune 500 companies. When not at work, Ayers loves reading science fiction novels and watching the LA Clippers.