Over the past year, the small business landscape has shifted drastically. Small business owners across the country buckled down to weather the pandemic. Surprisingly enough, in the face of an economic slowdown, even more individuals turned to entrepreneurship for the first time.
Despite continued uncertainty for small businesses across the country as COVID-related restrictions and supply chain disruptions continue, there’s still a steady rise in business and new opportunities. Whether you’re a new entrepreneur looking to build your small business from scratch or you’re coming out of the pandemic looking toward strengthening your existing playbook, here are several key steps to take:
1. Shore Up Your Foundation
Many businesses learned that operating as an independent contractor or being self-employed meant additional hassles applying for government grants and loans, or for getting the financing they needed.
If you haven’t incorporated your business, consider doing so. It’s a crucial step toward truly separating your business and personal finances and some lenders won’t lend to businesses that aren’t incorporated.
While you’re at it, take a serious look at how professional your business appears:
- Use a business email (and not a Hotmail or yahoo email address).
- Get a business phone number; you can even add one to your personal cell phone.
- Create a professional looking web presence you control; a simple website can suffice.
2. Review Your Business Bank Account
Increasingly, small business lenders want to review activity in your business bank account to help verify your business financial health. In fact, a business bank account is as important as your business credit to some lenders.
You’ll want to use a business bank account strictly for business revenues and expenses, and review it from a lender’s perspective:
- Do you have deposits from at least 8-10 sources each month or is your business heavily dependent on one or two clients or customers? More are definitely better here as you’ll better weather a slow-paying client or a reduction in one source of revenue.
- Are revenues increasing, decreasing or fluctuating? Steady or increasing revenues make lenders more comfortable lending to your business.
- How often is your account balance negative? An occasional NSF may not be a deal breaker, but frequent low or negative balances may sink your application.
3. Nurture Your Network
Business owners who were able to help connect with customers, fans and others who wanted to support their businesses were able to take advantage of those networking in a variety of ways ranging from crowdfunding to selling gift cards. Recently, an entrepreneur shared how a LinkedIn post helped him raise $1.3 million for his startup.
Choose a couple of ways to stay in touch with your audience. An email list you control should likely be one of those and a social media platform can be the other. Then regularly nurture your audience there. Provide value, and when you need their support they will be more likely to provide it.
4. Get Ready for Growth
There will be once-in-a-generation opportunities to buy businesses or acquire their assets from those who have decided they are done and are closing their business. Lining up financing to take advantage of these opportunities can make it easier to act quickly when the time is right.
At a minimum, businesses should secure a line of credit. Look into other loan options such as SBA loans or term loans to determine what you may need to do to qualify.
5. Protect Your Business for the Future
You can’t protect your business from every unexpected crisis, but there are many situations where insurance can be invaluable. If you’ve been putting this off or you aren’t sure if you’re adequately covered, take the time to review your insurance needs and options. If the time comes when you need it, you won’t regret it.
Gerri Detweiler has been guiding individuals through the confusing world of finance and credit for 20+ years. She is the author or coauthor of five books, including her most recent, Finance Your Own Business: Get on the Financing Fast Track. Today, Gerri serves as the Education Director for Nav, the simple and intelligent platform that matches small business owners to their best financing options and gives free access to personal and business credit scores.