Operating a small business can be a budgetary balancing act. To stay cash-positive and facilitate growth, you need to be diligent about controlling costs. At the same time, you have to fund expansion initiatives strategically to avoid overextending yourself financially. Here are some key things that you should do to mitigate your company’s risk exposure and protect your bottom line.
- Borrow Wisely
Small businesses need access to capital to drive growth. Increasing your operating capacity to generate more revenue is going to mean a big change in overhead. However, utilizing too much credit or taking out a sizable loan could put you in a tight spot. To avoid assuming obligations that could become problematic later down the road, you have to do a fair amount of due diligence and choose the lending solution that will best meet your company’s short-term and long-term needs.
Choose a business loan option with payment terms that don’t carry an unreasonably high interest rate. You have to be confident in your ability to meet your payment obligations consistently. You can’t base too much of your confidence on projections that are overly speculative.
- Keep Your Credit in Good Standing
Your business’ credit score is going to be one of the most essential criteria that financial institutions take into account when they’re evaluating loan applications. Your creditworthiness speaks to your business’ ability to meet its financial commitments.
When you’re establishing business credit in the early days of your operations, your personal credit could play an important role. Likewise, your business’ credit activity can impact your consumer credit score.
To maintain a score that works in your company’s favor when you’re applying for a loan or a line of credit, it is essential that you make timely payments on every active tradeline that’s part of your detailed credit report. In addition, you should try to keep your credit utilization under thirty percent. As an example, a business that has a thirty thousand dollar limit on an individual should not use more than ten thousand dollars of that amount at any given time.
- Choose Good Accounting Software
Savvy business owners shouldn’t approximate when they’re making decisions about their budget and what they can afford to spend on growth. You should always have a detailed financial picture of where you stand in real time.
You don’t want to be wholly reliant on accountants to answer questions about your liquidity or individual budget line items. Use an accounting software that will let you know exactly where you stand, generate helpful reports, and maintain a comprehensive understanding of the return that you’re getting in each investment that you make to boost revenue.
- Control Marketing Costs
The tactics that you use to market your business must be effective but also affordable. Concentrate on digital marketing outreach and engagement strategies that enable you to reach as many prospective customers as possible with minimal expense.
To manage marketing functions efficiently, it may be wise to outsource them to a marketing service provider. This approach to marketing is a more cost-effective approach to getting the word out about your company’s products and services. Trying to handle too many marketing tasks independently could wind up taking too much of your time away from the day-to-day affairs of running your operations. Hiring people to carry out marketing tasks under your direction may still require a lot of time spent on oversight and the cost of a full-time in-house marketing position might simply be cost-prohibitive.
It’s also worth considering that professional marketers bring more to bear than just affordability. They have insights about what tactics are most effective and how to craft messaging that will resonate with your target demographics. Look for a company that has a proven record of success and can demonstrate a strong understanding of what your business needs to do to build a successful brand.
- Shop Competitively
Every type of supply and service that you need to run your business can really add up. When you’re building your operating budget, you want to know that each individual expenditure is no greater than it has to be.
To buy supplies, look for suppliers that offer you discounts on bulk purchasers. A price match guarantee is a good sign that a supplier is setting prices fairly. Before you enter into service contracts, get bids from at least three providers to make sure you’re getting competitive pricing.
Keeping your business’ finances in order will help you grow your business and avoid setbacks. Lowering costs and limiting risks can safeguard your financial future.