Owning your own business can be one of the most challenging things that you do in life.
The thought of financing a business could be daunting in this situation. You are breaking out on your own and are responsible for everything.
In most situations, this may mean not making a profit for a while. On average, it takes small businesses over two years to become profitable.
If your business is going to survive the early stages of growth, you have to have some knowledge on business finance.
How can good small business financing help you succeed? What are the biggest things that you can do to expedite the growth of your business?
Here are six of our biggest tips.
1. HAVE ACCURATE BOOKS
If you are going to properly finance a business, you need to make sure that you are using the right numbers. This means knowing exactly how much money is going in and out of the business.
Are all of your orders being kept track of? How about expenses for business equipment and salaries? Are your accounts receivable and accounts payable sections accurate?
Keeping track of your income and expenses is crucial when it comes to following a business plan. The reason why this is the case is because your numbers are what you can realistically build a business plan around. It lets you know what you have to work with.
So, if these numbers are wildly inaccurate, it can cause your business to either miss out on a big opportunity or potentially go bankrupt.
2. CREATE A GOOD MARKETING CAMPAIGN
The next thing that your business needs to do is create a good marketing campaign. Dedicate some money towards it and figure out the best way to take your product or service to the next level.
An average small business spends around 15% of their revenue on marketing. The reason for this is that marketing is the thing that helps let your audience know that your business exists.
Examples of this can be dedicating resources to social media campaigns, email marketing, video content, and more. The goal here is to develop content people will remember.
You need a campaign that can create a hook in a short amount of time for your audience. Make sure that you dedicate the right resources and the right personnel towards this.
3. FIND AN ANGEL INVESTOR
If you want to see quick growth for your business, one thing you should proactively do is find an angel investor. Having someone with expendable resources that can help fund your business can be a game changer.
Let’s say that you put every penny you had into your business. You could be seeing a surprising amount of activity from your audience.
However, you may need a factory that costs millions of dollars to keep up with your new demand. An angel investor can help you take that next step if they see potential growth and a big return on investment from your business.
4. CUT UNNECESSARY EXPENSES
Another way to help grow your business is to put more money back into your pocket. This is not always done by adding income. Sometimes, cutting back on expenses can be just as important, if not more important, than generating more income.
Take a hard look at your small business financing. Review all of your expenses and see if there is anywhere you can cut back.
An example can be buying more supplies than you need. Cutting it back by 25% for example could save you thousands of dollars.
Another thing you need to look at here is your payroll expenses. Do you have more employees than you need? If you discover this is the case, you may need to make a tough decision and lay somebody off.
5. SET A STRICT BUDGET
Once you review your finances and make sure that your books are accurate, you should have a good idea of how much money it takes to run your business. When you have a firm number, it is time to build your business plan around that number.
Part of a good business plan is sticking to a strict budget. Unless you are planning massive expansion, you may want to plan a budget that does not exceed $500,000 for example.
Whatever you determine your proper budget to be, you need to stick with it for the foreseeable future.
6. MAKE AN EMERGENCY FUND
Finally, you need to have an emergency fund in case something goes wrong. In business, there are going to be unforeseen things that come up.
The recent COVID-19 pandemic is a perfect example of this. Some businesses found themselves closed for the better part of a year.
While it is unlikely that businesses see another period like this again, you need to be prepared for when something unexpected happens in your business. If you fail to do this, you may find yourself lacking the funds to overcome that situation.
GET HELP WITH YOUR BUSINESS FINANCE
These are six business finance tips that you can use to help grow your business.
The most important thing you can do is to make sure that you have a proper budget. To do this, you need to make sure that your books are accurate and all of your expenses are crucial to the business.
Then, you need to create an emergency fund in case a rainy day comes and you should seek outside help for business funding.
Do you need help with your business finances? Apply for business funding here.