Is your small business seeking capital, or are you planning to do so in the year to come? Getting a business loan is not easy, but in today’s guest post, Matt Burk of FinanceCoach.me takes a closer look at what matters most in obtaining the money you need.
A recent survey of small business owners reveals the stark reality of getting a business loan: 50% of those who sought a bank loan were denied. And among those who were denied, 38% intend to improve their business finances before seeking capital in the future.
Regardless of your ability to get a loan, there is one simple thing you can do to improve your profitability and success this year: Understand your business’s financials.
Over the past 20 years, I have worked with thousands of small business owners in a wide variety of industries. A common trait they shared was a lack of interest and expertise in their financials. Most small business owners excel at making or selling their products or services, but few enjoy dealing with their financials.
Yet, a business’ financial statements tell a complete picture about a company’s past, present and where the opportunities for future growth and profitability can be found. This is why they are so important to your banker.
Before seeking a business loan, small business owners should take the time to truly understand their financial statements. They can tell you all sorts of interesting things, such as:
- The true profit drivers in your company
- Your profit margins by product and/or customer type
- If your pricing strategies are effective
- Whether you are carrying too much inventory
- If your customer payment policy is a detriment to your cash flow
And this is just a small sample of what’s hiding in your financial statements!
Awareness and understanding of your business’ financial trends is the foundation for your success. Armed with information about your company’s financial performance trends, you’ll be able to set priorities for the coming year, identify your strengths and weaknesses, and determine how best to address your shortcomings – whether that means adding to your staff, investing in equipment, or outsourcing to a vendor.
You went into business for yourself in order to make money, right? It’s time to find out where your money goes, why, and how you can make more of it!
Matt Burk is a serial entrepreneur and is passionate about empowering small business owners through financial literacy. He is the founder and CEO of FinanceCoach.me, an affordable subscription-based advisory service for small business owners designed to help them better understand and manage the financial side of their businesses.