In an SBA study, it was found that 50% of small businesses close shop after just five years. In the wild west of startups, why is it that some survive and others don’t? The answer, more often than not, is to do with financial sustainability. And of course, not trademarking or getting a patent on your intellectual property is one of the biggest financial mistakes to avoid. We are going to talk about how to avoid financial pitfalls that you might not think of.
If you want to end up on the right side of the coin, you’ll have to budget carefully, organize efficiently, and exercise some discipline. Insurance Advisors of Saint Louis explains how.
It’s difficult to overstate the importance of budgeting for a business of any size. Especially if you’re dealing with lots of overheads, CommBank notes that you’ll need to develop an airtight financial plan to prevent yourself from sinking into debt. This is your opportunity to review utilities, cash flow, licenses, and budgets for marketing, salaries, etc.
If you’ve correctly indexed your balance sheet, you should be able to spot areas where it’s possible to cut costs – for example, public relations campaigns are often more cost-efficient than marketing. By integrating PR into your marketing strategy, you can sometimes improve your ROI. Additionally, you can make adjustments to your marketing budget by using tools like a logo creator online to create images on your own. Of course, when you have the money, you can always return to these ideas and have a professional redesign them.
If you want to bring in someone to streamline your marketing department, look into freelance marketing consultants. However, before hiring anyone, do some research into marketing consultant hourly rate information to ensure this is a budget-friendly idea.
It’s one thing to write up a financial plan, it’s another to stick to it. Keeping on top of expenses is no easy feat and you’ll have to think efficiently if you want to avoid overspending. A good start is to automate your outgoings so that bills are always paid on time, late fees are avoided and you won’t have to process them manually. You may also want to set up automatic billing for your own customers, this helps to guarantee cash flow and reduces time spent on admin.
As your business grows, it can be tempting to splash out on extravagances, but successful business owners tend to exhibit financial conservatism. Luckily this is a learned habit – if you’re struggling with this, a part-time degree in accounting can help you to maintain financial discipline.
Often, the debilitating issues for a small business are less to do with the finances themselves but instead the organizational work behind them. From the outset, this means understanding tax obligations – you are usually required to charge and collect sales tax, pay a portion of Medicare for your employees, or file 940 forms for federal employment. Failing to meet these can be catastrophic for a small business. There is a lot of admin ahead, so make sure you familiarize yourself with the different obligations.
By now it may be obvious, you’ll need to utilize tech if you want to track expenses properly. Analog simply will not cut it as your business develops and the list of overheads continues to grow. Your starting point is a simple accounting program, preferably one that is compatible across mobile and desktop so you can keep watch wherever you are. But, remember, whilst the right software will help, the key decisions are up to you.
With the right conservative mindset and a lot of work towards tracking and managing the budget, you’ll have ruled out the main reasons why a small business fails. How you proceed after that is up to you.