Avoid impulse purchases
Money for your small business!
As a small business owner or manager, it’s crucial to know how to keep your business thriving, even during economic downturns. One key principle to adopt is the “tight ship” philosophy, which emphasizes prudent money management during times of cash flow tightening. This article will provide you with practical tips and strategies to safeguard your business from unnecessary expenses and help you weather challenging times.
One common mistake small business owners make is making non-essential purchases based on momentary impulses. To prevent this, consider including language in your by-laws (if you are incorporated) stating that all purchasing decisions above a certain amount are contingent upon board approval. This will force you to carefully consider impulse purchases and may act as a deterrent for smaller impulsive buys as well. If you are in a partnership, make it a practice to seek approval from a third party before making any purchases. As a sole proprietorship, take advantage of your three-day cooling-off period and carefully evaluate whether or not the purchase is necessary.
Invest in professional services
During times of crisis or emergency, it’s essential not to skimp on professional services. Seek the advice of experienced professionals before making decisions that could potentially harm your business. Engage an outside accountant or accounting firm to analyze your Return on Investment (ROI), accounts receivables, and inventory turnover. Opt for an audit or survey that delves deep into these financial aspects to identify any potential problems before they become significant. Additionally, consider establishing an advisory board of external professionals who can offer valuable insights and objective advice.
Consider taking advantage of the 1244 stock classification to attract equity capital into your business. This classification allows investors to write off losses, up to the entire investment amount, in the current year. Without this classification, losses would need to be spread over several years, diminishing the attractiveness of your company’s stock. By leveraging the 1244 Stock Classification – filing for the 1244 corporation – you will open your business to a vast pool of potential investors, thereby strengthening your financial outlook.
Focus on the basics
In times of reduced sales, it’s essential to prioritize essential expenses and forgo unnecessary luxuries. While entertaining salespeople with new equipment or supplies might be tempting during prosperous times, concentrate on the fundamental aspects of your business when facing a downturn. Maintain courtesy and professionalism with sellers, fostering positive relationships for future opportunities.
Developing good financial habits can aid in sustainable business growth. Establish a habit of contacting customers who are falling behind on payments and ask for explanations. By showing proactive concern, you increase the likelihood of being prioritized for payment. Additionally, build a strong credit rating with local banks during periods of positive cash flow. Regular borrowing and timely repayment will enhance your borrowing power and provide you with quick access to necessary funds when needed.
To conclude
Oxygen. Money. Done! Any questions?
Join local and national trade associations related to your industry. These associations offer valuable information on competitors, sales figures, new products, and industry trends. Display any membership certificates or plaques to instill customer confidence. Additionally, take advantage of free business counseling services offered by resources such as the Small Business Administration, local universities, banks, and libraries. These outlets provide valuable insights, booklets, brochures, and seminars to help you strengthen your business acumen.
Successfully navigating the challenges of running a small business requires pragmatic decision-making and proactive money management. By carefully evaluating purchases, investing in professional advice, leveraging financial classifications, and focusing on core necessities, your business can remain resilient during times of economic uncertainty. Surround yourself with knowledgeable professionals, maintain good financial habits, and take advantage of available resources to ensure business success in any economic climate.