Starting a new business entails myriad challenges, but the greatest one of them all is funding. Acquiring funding is one of the most integral steps of opening a new company, and avoiding bankruptcy is the primary struggle of the early years of any small business. Learning how to manage your company’s finances is an important part of keeping your business afloat, and these tips can help you get started down the path toward long term prosperity.
Budgeting
The most foundational step toward improving your financial situation is budgeting. By creating a budget, you can commit to the kinds of changes you’d like to make in your spending. Before you can do that, however, you’ll need to first understand your current expenses. Using budgeting software, you can take note of how much of your budget is going to each of the essential categories. From there, you can start to make tweaks to your use of money in order to increase your bottom line. The general rule of making a profit is that the profit is what remains after you have earned revenue and used a portion of that income to cover the costs of various overhead expenses. By the very nature of the situation, this means that many of your expenses are non negotiable. Or, rather, it means that you must pay some amount of money for them, and that means that the amount itself can be flexible in many instances. On the other hand, it’s crucial that you find ways to increase the revenue from which your expenses are covered and your profit will remain.
Cutting Costs
The most essential way to use your budget is to spend a little bit less when and where you can. This in turn drives up your remaining profit margin. As mentioned above, many of the costs of doing business are utterly necessary. However, you can still find ways to save money where you can’t avoid those costs entirely. For example, restructuring your supply chain can help you to save a little bit of money here and there. You’ll need to do some research into your local options in order to find the right fit for you, but keep in mind that you can only reduce the price you pay so much without affecting the quality of your products and the reliability of the delivery process. Another option you have is to buy from manufacturers directly in order to avoid the markups associated with distributors and wholesalers, but those markups also come with various forms of added value, so choose wisely.
Eliminating Expenses
While it’s typically unfeasible to completely eliminate costs from your overhead, it’s not entirely impossible. For example, going paperless is an increasingly common tactic of scoring some positive PR in an increasingly environmentally conscious world while also eliminating all of the costs associated with the printing of documents day in and day out. You might think to yourself that there’s not much room for saving money when it comes to ink and paper, but those numbers quickly add up when you frequently need to reup on paper, ink, and toner, not to mention the high initial cost of the printers themselves and, eventually, maintaining or replacing those printers. On the other hand, going paperless piggybacks on the existing internet infrastructure of your business to provide an alternative to printing that is effectively free. Additionally, just about everyone would prefer a text message or an email instead of the more cumbersome paper documents that are a hassle to carry and easy to lose. There’s simply no downside to switching to a paperless business model; at the very least, it should be an option for customers on a case by case basis.
Increasing Revenue
Once you’ve made the costs of doing business more affordable, there’s nowhere left to go but up. The next big step is to increase your net revenue, and doing so is arguably the most important part of doing business. For that reason, it’s the part of doing business that your company will continue to focus on moving forward. Making more money entails providing higher quality products and investing in marketing. Marketing will bring in new customers and inspire loyalty in the old, but that won’t count for much when your products are simply inferior to your competition. Therefore, you’ll need to invest in both quality products and marketing in tandem in order to drive up your overall take. Doing so will provide the best pool from which to cover your costs even more effectively and, more importantly, to produce a worthwhile profit.
Conclusion
Keeping a business afloat is no easy feat early on, and most small businesses close their doors within a single year as a result. Overcoming this trial is an essential part of earning your place among the greats, so instead of getting discouraged, you can rise up to the challenge and build a business worthy of that honor. These tips can help you get there.
