A successful small business is dependent upon the financial management strategies you employ. From the planning stages of your venture, you need to implement financial strategies that take everything from initial funding to budgeting for necessary personnel and scalability into account.
Amidst the complexity of securing your finances for success, you need all the help you can get. As many as 95% of small businesses don’t make it past the first five years of operation. If you are planning to launch your small business and haven’t taken this detail to heart, this could be a red flag that you’re making poor business decisions.
With this in mind, you need to consider all the ways you can improve your approach to financial planning to secure your future. These seven strategies will help you navigate a successful small business even facing the pandemic economy.
1. Build your credit.
Every small business journey should begin with good credit. Credit determines what kind of financing options you’ll have access to and can be instrumental to your success facing unexpected financial needs — like an economy-crippling global pandemic.
Start with the planning stages long before your small business has even launched. Your plan should include best practices for building good credit, including automating payments to avoid lateness, paying down your debt, and making at least your minimum monthly obligations.
With good credit, you will personally be able to qualify for lower interest rates, higher limits, and more spending power overall. This will be instrumental in helping you qualify for collateral and business funding that can drive your small business.
Good credit can make all the difference in securing investment opportunities. As a result, you’ll have the tools to support your small business endeavors beginning with an ideal financial foundation.
2. Create a water-tight business plan.
But all the financial options in the world are only as good as your overall business plan. If you don’t have a plan in place that considers all of your potential expenses, including your scalability needs, you will put yourself in a precarious position when starting out.
That’s why implementing a water-tight business plan from the very beginning of your financial organization is key. This means planning out and ahead for all your growth goals to accommodate different potential circumstances.
Consider not only what funding you need to get off the ground, but how you will be able to support the growth and scalability of your business. This includes your approach to advertising, hiring new staff, and meeting all tax obligations with accuracy and preparedness.
Explore creative ways you can fund an efficient business plan. Every small business can find innovative methods to bridge gaps and maximize efficiency. It all depends on your ability to innovate and think outside the box.
For example, peer-to-peer lending, microfinancing, and even contest winnings can help you support a business plan against unexpected circumstances. Apply creativity when cementing your comprehensive business plan to help you adjust to a changing economy in the wake of the pandemic.
3. Choose your financial support tools.
The tools you choose to help you manage everything from fiscal expectations to weekly payroll will be instrumental in achieving financial success. Right now, the market is overflowing with software-as-a-service (SaaS) and other helpful tech platforms that can make all the difference in effortlessly managing your finances.
For example, SaaS is a massive growth industry that is constantly evolving. You can find software that allows you to input and project long-term financial estimations and even model various business decisions with the power of artificial intelligence analytics.
Additionally, various platforms will help you automate your payroll and auditing processes to avoid human error and miscalculation. These comprehensive dashboards for managing employee salaries, accounts payable, and business revenues can make for a streamlined approach to financial management, allowing you to focus on growth.
Find the right financial support tools for your small business to take the stress and effort out of managing your day-to-day costs. Then use analytics to support predictive modeling and data-driven business decisions to secure your financial success.
4. Budget, budget, budget.
Alongside your business plan and financial support tools, you need to maintain a fluid, living budget that can accommodate all of your unexpected small business financial needs. Like with all aspects of healthy finances, a budget is absolutely vital to success.
Start by using a budget calculator to lay out all of your small business essentials. From the overhead you’ll need to get off the ground to your expenses on a month-to-month and even daily basis, you will need to work out exactly what you expect to pay so that you are not consistently in for costly surprises.
This includes accounting for contractor services, software tools, employee benefits, tax obligations, facility and utility costs, and any other associated needs you might have as a burgeoning business.
While you won’t be able to account for every expense that might come up, a thorough budget will help ensure that you overestimate costs rather than underestimate your financial needs. Create a budget, then consistently review it for ongoing success.
5. Network with banks and financial professionals.
With an effective and thorough budget in place, you can be better prepared to estimate exactly what funding and investment assistance you will need to catapult your small business towards the success that you’ve dreamed of.
But without a safety net of funding and financing options at your back, unexpected costs or emergencies could derail your plans.
That’s why it’s important from the earliest stages of your small business to begin to network with banks and financial professionals who will help you find the right financial products for anything that might come up. With financial advisors and baking professionals at your back, you will be effortlessly able to navigate all your options for loan products, grants, investment sources, and more.
Plan for financial success by making the right connections with financial professionals. A financial advisor and a tax specialist will help you maximize the financial efforts of your business plan. This can make any fees associated with working with these professionals worthwhile investments that allow your small business to get off the ground running.
6. Understand your tax obligations.
As we mentioned before, your tax obligations are a vital part of planning effectively for the future. You may have plotted an effective budget and small business business plan. However, when tax time comes, an unplanned financial obligation can derail all your planning and setback your overall financial goals.
That’s why it’s necessary to consult with a tax professional in your area. These professionals can help you understand every element of your business model in regard to local and federal tax obligations. This is a vital step for any entrepreneur before launching a business venture.
However, many entrepreneurs move ahead with their small business plans without taking the time to understand all their tax needs. The specifics of your various assets and income obligations are beholden to constantly changing rules. From emerging cryptocurrency regulations to tax rate variations in different regions, understanding the specifics of your tax obligations will help you plan more appropriately for small business success.
For instance, you may not think that the cryptocurrencies you may have invested in your small business have to be monitored and reported. However, the Internal Revenue Service has declared that these non-monetary assets are in fact taxable as property and require thorough documentation.
Speak with your tax professional to understand exactly what all your specific tax needs might be so that you don’t encounter any surprises. Keeping such a professional on hand will also help you keep up-to-date with shifting global regulations. This is especially important when dealing with newly common financial assets like crypto or any virtual currencies operating on blockchain systems.
7. Don’t underestimate personnel needs.
Finally, don’t underestimate the personnel needs of your small business when implementing your plan from the beginning. Ideally, your business will grow. And while you can’t anticipate every road bump or unexpected expenditure, you can at least start out with a plan in place for how you will scale your business with the right staff and corresponding benefits.
Take employing an accountant for example. Demand for accountants and auditors is rising, set to increase 6% by 2028. This puts these fields in the top 15 fastest-growing professional sectors. With this in mind, you will need to accommodate an accountant with a competitive salary and benefits.
Accountants and auditors currently have a median pay of $70,500 annually. When developing a plan for how your small business might scale associated staffing needs, it is essential to plot competitive salaries according to local and larger market trends. In the wake of COVID-19, remote working policies may mean you have to bump up your expected pay scale, depending on your local market.
Once again, a financial professional can help you understand what staffing you’ll need and how much you will have to pay. This understanding will be vital for continued success.
Securing Small business Success
In the race to achieve a lucrative small business, there are a large number of factors that might cause you to fail. Among these are building a product no one wants or focusing too much on investors rather than your actual users.
A streamlined and thorough financial plan can help you develop a financially secure small business from the beginning. But if you haven’t considered your user enough — or elements like how you will conduct marketing and the associated costs — you will encounter problem after problem as you attempt to grow your business.
This is why it cannot be stressed enough how much a comprehensive approach to small business planning will affect your long-term financial goals. Outline and map the anticipated path of your business as you look to grow. While specific numbers and timelines may change, at least understanding face overhead costs will allow you to better meet the needs that arise.
Then, you can go on to streamline the way you model expected growth, accounts payable, and any necessary additional funding. The right software tools will make this process simple, with plenty of potential for automation. Additionally, your network of financial professionals and institutions will be able to support you as you adjust your business plan to meet any challenge head-on.
Consider these seven tips and how they each can help you maximize the financial success of your small business from the planning stages onward. Then watch your small business grow and thrive — even in an uncertain economy.