Running your own business might be a dream come true for you. Being your own boss takes a lot of the stresses off – you’re probably more satisfied with your work than an employee struggling in a corporate environment.
But small business owners know it’s not as easy as it sounds. Although you don’t have to worry about being fired, the company’s finances are your finances, and vice-versa. Your number one priority now is making sure your business has enough in the bank to pay you, your employees, utilities, and vendors. You’re also responsible for getting the products on the shelves and getting them out the door, just so you can begin the whole cycle all over again.
A recent Canadian poll showed that finances was the second biggest cause of stress for small business owners, after hiring – and retaining – reliable employees. It’s not always easy to balance the books, especially if your business is new or seasonal. It takes time to get used to the process of invoicing and paying everyone. And if there is a feast or famine cycle of work or customers, you’re probably looking for strategies protect your business during leaner times.
The good news is that it gets easier with time.
In an ideal world, you’ll make the desired profit from your entire inventory. In reality, this rarely happens for small business owners.
It takes time to learn when you should place orders and estimate how much stock you need, depending on demand. Remember that, for most businesses, you are buying wholesale to make a profit. If necessary, it is always better to sell goods that have been sitting around for a while at a discount – but still at a break-even price for you – rather than have it sit around collecting dust.
Goods will depreciate, and the longer you wait, the more money you will lose. Stagnation is nobody’s friend, especially if you’re dealing with perishables.
You need a solid invoicing and follow-up system, so you can bill your customers on time. At first blush, you may think that you’re doing them a favor by not billing them right away – more money in their coffers for longer, right? Wrong.
As much as you’re trying to balance your books, other businesses are trying to keep on top of their payables, too. Send invoices promptly, along with your sincere gratitude, of course. (Tweet this)
Don’t forget to set up a time frame for follow-ups. Three weeks (or 15 business days) is about right for sending a reminder.
To make it easier for everyone, consider setting up a credit card billing function, so that your regular clients can make auto payments, instead of issuing a check or going online to make an e-transfer.
Consider Running a Promotion
Businesses have predictable busy months and slow months every year. For instance, flower vendors are busiest during valentines, while turkey farms are busy the months leading to Thanksgiving.
Think about the lean months for your business, what causes it and is there a way to get more customers in? For instance, rainy days are considered ‘low season’ for resorts, so they’re more inclined to give discounted rates and promotions. Can you do something similar?
Creative small business owners reach out to a group coupon service to sell vouchers, offer discounted rates for new customers, or bundle up several services or products into one heavily discounted offer. They get creative to keep their business afloat.
Running a promotion is a great way to get rid of old inventory, and ensure you have incoming cash—and customers—during the dry months.
Improve Your Inventory
Take a long, hard look at your inventory or at the services you offer. What moves out the door quickly? You likely have a product that keeps getting sold-out, sometimes even before you can place another order. But you may also have a product that stagnates, constantly getting marked down to rock-bottom prices before anyone notices.
What kind of services do your customers often get? What do they ignore?
Check your sales records to look for these trends then make changes accordingly. Stock more of that product that frequently gets sold out. Stop carrying those items your customers don’t want. Examine the services your customers don’t often choose—is it outdated, terrible, or just not packaged well enough? Small business owners know that inventory matters, so they keep meticulous records in hopes of gleaning from that data later on and improving their inventory.
Despite your best efforts, you don’t have a crystal ball, so you may find yourself in a financial crunch at some point. The key is to relax and learn to roll with the punches.
Try the strategies here now—whether times are good, or you’re struggling to keep afloat—just think of it as your buffer for when the going gets tough.