Running a startup isn’t easy, but having the right attitude makes a huge difference. Embracing change and seeking out good advice allows an entrepreneur’s chances of financial success to skyrocket.
Entrepreneurs encounter more than a few obstacles when putting a business idea into motion, but that’s not necessarily a bad thing. Every setback offers the chance to learn and grow. Incorporating the below tips into a business strategy will help small business owners get past any stumbling roadblocks.
Hire to fill knowledge gaps
Naturally, small business owners keep close tabs on their operations. Of course, there’s a fine line between being hands-on and insisting on doing it all.
Six in 10 small businesses are independently operated, according to a 2017 small business survey by TD Bank.
However, a business can only reach a certain level of success when running as a solo operation. Small business owners in this situation might begin to feel weighed down by the sheer volume of tasks on their plate, and the fact that their expertise is limited to a few select areas.
Overcoming these hurdles is made possible by hiring employees or contractors with knowledge a small business owner may not have. Let these employees handle tasks that aren’t the best fit for the business owner, so they can put skills to work where they’re needed most.
In the next year or so, 46 percent of small businesses hope to increase revenue, according to the survey. Of those planning to grow, 31 percent intend to add new products or services to their lineup to boost sales.
Despite these plans, small business owners know they’re up against several challenges in the next 12 months. Nationally, 56 percent are concerned about the health of the local or regional economy and a quarter of responders are uneasy about the potential regulatory changes of the new presidential administration.
It’s necessary for entrepreneurs to create goals for their companies to achieve each year, so nothing gets in the way of success. The best way to keep external factors from having a negative impact on the bottom line is a willingness to adjust your plan as needed.
Keep track of every penny in and out
Keeping tabs on all of the money going in and out of a business can be daunting, but it’s necessary. Properly monitoring the finances of a small business means knowing where every penny is spent, and accounting for every penny coming in. Anything less could mean the downfall of a business.
One-quarter of small business owners work with a financial advisor or dedicated banker to manage company finances, according to the TD Bank survey.
Beyond helping keep a business in a healthy financial state, an industry professional can explain key concepts and give advice specific to your startup. For example, the survey revealed that 69 percent of small business owners don’t think they have a business credit score, and some don’t even believe it exists.
Basic business concepts (such as accounts payable and accounts receivable) are on small business owners’ radar, but more intricate issues often require guidance from a professional. Getting finances in order now and will make for smooth sailing down the road.
Explore alternate sources of funding
Running a business can be a pricey endeavor. Hopefully, small business owners have a grasp on all standard expenses, but overlooked costs can quickly mount into a massive obstacle.
If you don’t have a business credit card, consider applying for one. Nearly one-half of companies have a business credit card, according to the survey.
As businesses continue to grow, owners will inevitably need a source of income to keep up with the changing demands of customers. Using a business credit card wisely and having a good business credit score can help small business owners qualify for loans in the future.
Don’t neglect personal finances
It’s always disappointing when things don’t go your way, but failure isn’t necessarily a waste of time. Small business owners should turn every obstacle into a lesson learned by focusing on growth.
For example, the survey revealed that five percent of small business owners have been turned down for business credit or a loan, with 34 percent rejected because their personal credit score was too low.
Instead of becoming discouraged and giving up, small business owners should learn the factors behind the bank’s decision and work to make a change for the better.
Personal credit scores make up a significant portion of a business credit score calculation. The larger a business is and the longer it’s been established, the less your credit scores factor into a bank’s credit decision. Note, too, that personal cash flow is often combined with business cash flow and reviewed by banks as a Global Debt Service Coverage (GDSC) calculation.
Many small business owners take money out of company accounts for personal expenses or use their own funds to give the business account a cash infusion when needed. Consequently, banks need a combined view of personal and business cash flow to make sure the business owner won’t overstretch finances and potentially bankrupt the company.
If a business owner’s debt load is already too high, they’ve mismanaged their personal credit or stopped paying student loans or a mortgage, that can be a red flag to a bank and it will impact their GDSC. A poor GDSC is a very common reason small businesses are turned down in credit applications.