Budgeting helps hone a business owner’s focus on performance and income versus spending. If you find that your business is in a financially tough situation, creating a budget is the first thing you need to do. When you take the time to budget and find you are overspending, you can carefully look at expenses and see what needs to be trimmed.
For example, small businesses that are underperforming may need to save money by downsizing office space. Today, we have more options for downsizing office space in a flexible, month-to-month manner with coworking spaces. Such spaces often do not require leases. Downsizing may also require selling newer, more expensive equipment and buying used equipment or renting when you have the need.
According to the Harvard Business Review, it is five times less expensive to sell to your existing customers than to find new ones. Can you come up with complementary products or services to sell to your existing customers? Can you do a better job making customers aware of your other offerings? Also, you can reduce the amount of time that business customers are required to pay their bills? An easy way to get clients to pay their bills sooner is to offer a discount for paying in a more timely manner.
Also, can you better target your ideal customer? Too many companies use a scattershot approach to marketing – targeting everyone and hoping to make some sales. If you are on social media where your customers hang out, you will be more likely to make conversions. Consider finding a YouTube or Instagram influencer to help you find and keep your ideal customer base.
Seek Lower-Interest Credit
Let’s say your budget was already in place, but you ended up with a new client whose order outstrips your ability to provide the goods or services. This is where you may want to consider self-employed loans. Self-employed loans help business owners purchase needed supplies and materials in order to fulfill orders. Such loans will be at significantly lower interest rates than if you use your credit cards.
Current business credit cards are hovering around an interest rate of 17 percent. At such high rates, it gets tough to pay down the balance. Loans for the self-employed often have terms that allow you to pay off the loan over a few years. That helps to increase your cash flow because you will be making a lower payment each month in order to attack the principle,
Keep Business and Personal Finances Separate
According to Inc. Magazine, small business owners need to maintain separate accounts for business and personal expenses. Otherwise, you run the risk of putting too much of your personal funds into your business. Also, you may be held personally liable for business debts that you default on.
Pay Yourself the Market Rate
Inc. also advises small business owners to not undercut their own salary. Many small business owners try to low-ball bids beyond a figure that allows them to make a living wage. The practice of charging too little harms cash flow and makes sticking to a budget tough. Later on, you will end up having to charge customers more for your products or services.
Don’t Hesitate to Get Financial Advice from a Professional
There is so much to do when you are in business for yourself. It is okay not to know everything. If you are not a financial professional, then it makes sense to consult the services of a financial planner for small business owners when you get in a bad situation.
The Small Business Administration has retired business professionals who can provide advice with budgeting, marketing, and financial planning. Their advice is free.
When the finances of your business are not looking healthy, it is time to step back and budget, reduce expenses, increase income streams and sources, obtain self-employed loans and seek the advice of financial planners.