Building a successful small business can be very rewarding, but it can also be very challenging. Of course you want to make sure there is a market for your product or service, but honestly one of the biggest hurdles that people face is cash flow. You need start-up cash as well as money to pay for your day to day expenses, and money to pay for future expansion. Cash flow is the lifeblood of any business and critical to its success. Small businesses depend on their cash flow and when money is in short supply they may not be able to grow as planned, or worse yet, may end up closing their doors. To prevent this from happening it is important for small businesses to find ways to save on all their business expenses and manage their money well.
Calculate Your Break-Even Point
A cash flow is the single most important aspect of your business because it focuses on the actual cash that goes in and out of your company. Make a list of all the startup costs or one-time expenses, your monthly fixed and variable expenses, and project your sales to see if this business is feasible. Without knowing your costs and expenses, you will not be able to project your income needed to make a profit in your business.
Minimize Office or Retail Expenses
When you first start out consider if you can work from home. If that is not possible look for office space or retail space that is extremely affordable. When decorating, skip the fancy furniture, or skip buying the most expensive equipment. Within your work space always use energy efficient electronics and low wattage light bulbs.
Manage Inventory Closely
The more inventory you have in your warehouse or in your retail outlet the less cash you have on hand.
Instead of buying in bulk when you first start out, buy a small amount to test out the market. Always deal with suppliers that offer quick delivery, and watch each product closely so that you know when you need to reorder.
Avoid Using Credit Cards to Finance Your Business
Credit cards typically come with a very high interest rate and relying on a credit card to pay for your day to day expenses, or even inventory, is not the best idea. Instead, consider a low interest business line of credit.
If you find that your cash flow is poor and your accounts receivable balance is high, you do have other options that you can turn to in an effort to boost your cash flow. Some businesses prefer invoice finance as a way to increase their cash flow. Invoice financing works well for businesses that sell large orders of products to customers on a credit basis of 30, 60 or 90 days. Invoice financing releases cash quickly so that you are not sitting and worrying about whether or not your customers will pay in time for you to pay next month’s expenses.
The less time you spend worrying about your finances the more time you can spend increasing your sales.
Use Your Resources Wisely
When you operate a small business you can save a lot of money by hiring good employees that are capable of doing more than one type of job. Look for people that truly enjoy working for a small business and are eager to help you grow your business.
For example, a person that can do office administration work including bookkeeping and marketing would be a great resource for you.
Market on a Shoestring Budget
One of the things that small businesses typically spend too much money on is marketing. If you want to be frugal and save money learn how to market your small business on a shoestring budget. Of course your marketing plan will be based on the type of business you have, but there are many ways to get the word out these days without spending lots of cash.
Skip Business Travel
Will your business require you to travel to meet with clients or to purchase products or equipment? Be smart about when you should travel and when another option such as a conference call may be suitable enough. The cost of business travel can add up quickly and should be limited to times when you truly need to meet with someone face to face or you need to physically be onsite. Otherwise, take advantage of a video call or just use email.