As a small business owner, your dream is to acquire financial freedom, not only to pay the bills, but to scale your venture to be self-sustaining and serve as an asset. However, you may find yourself in need of revamping your financial strategies to not just break even, but make a profit.
With April being Financial Literacy Month, it is a good reminder to take a pulse check and brush up on your financial plan moving forward to set yourself up for a strong quarter ahead.
1. Be Mindful of Your Credit Score
Maintaining a high credit score is essential for being able to invest in and grow your business. Being approved for good business credit cards and low-interest rate loans will require a high credit score. If you are in the position where you have taken out too many business credit cards, for example, and have overdue or late payments, you may find yourself with a low credit score.
You can try to negotiate with lenders and investors to find a payment plan that better works for you. Especially now, because of the pandemic, you may have some wiggle room for the time frame, minimum payment, or even some forgiveness.
As for some general tips to avoid a low credit score in the first place, make your payments on time, and ensure you don’t fall behind. You should also be sure to verify and monitor your credit and perhaps correct any errors that may be dragging down your score.
Once your credit score is on an upward trajectory, maintaining a high score will be reliant on you being proactive and effective at managing your operations.
2. Use Tools to Help You Budget
Being an efficient budgeter can be game changing. You must be careful to keep track of all your expenditures, which can be aided through the help of a budgeting tool or software. Here are a few types of tools to consider:
- Budgeting apps or software
- Mobile banking for business apps
- Online bookkeeping
- Spreadsheet templates
3. Take Advantage of Small Business Stipends
You may have found yourself borrowing money from different sources in order to scale your business, and have accumulated quite a bit of debt. In order to save and also obtain money at the same time to propel your business forward, look into small business programs and grant opportunities at the national, state, or even local level. Depending on where your business is located, there may be generous small business stipends that you can apply for and utilize without having to go further into debt.
4. Be Conscious of Your Personal Finances
As a small business owner, your goal for your business is to provide you with a profitable venture so you can live your best life. However, it can be hard for a small business owner to generate a steady sufficient revenue and balance both professional and personal finances.
If you find that you are needing to invest additional money in your business, but it is not in strong financial standing, it can be helpful to cut down on extraneous costs in your personal life, in case you need to dip into your personal finances or savings.
Although not ideal, many business owners at some point find themselves in this position. Therefore, it is important that you are being responsible with your personal expenses. For example, if you need to downsize your home, you may consider getting preapproved for a mortgage to best understand what you can realistically afford to pay month to month. Talking to a financial advisor or creating a personal budget could also help. Such strategies can contribute to a better understanding of your personal expenses and how they fit into your budget to better position yourself and your business.
Oftentimes, you may be so caught up in the management side of your business that you may be overlooking or allowing financial fundamentals to fall to the wayside. The difference of moving from self sufficiency to rapid growth can come down to financial planning in combination with discipline and efficient operational management. Approaching your business with a well-rounded plan can make all the difference and set you up for long-term financial success.