Today’s small businesses have more competition than ever. In the last five years alone, we have seen numerous small businesses fold under the pressure. According to U.S. Census Bureau data, between 2008 and 2010 alone, over 170,000 small businesses closed.
One reason for failure is that many small businesses fail to maintain a healthy financial status. Business owners don’t review their financials often enough and by the time they see the problems, in many cases, it’s too late to save the business.
In order to maintain a healthy financial status remember the following:
- How much fluidity does your business have? Meaning, how much cash (or assets that can be liquidated to cash) do you have? Having cash readily available when you need it is important. Call it a rainy day fund for your business.
- Curb your credit card debt. Many of today’s businesses are relying on credit cards to get them through. In many cases, assuming a small business loan would be more beneficial in the long run. Credit cards can easily pile up a large amount of debt with numerous payments to your various lenders. Consider a lump sum small business loan to get you through.
- Analyze the status of your accounts receivable. Do you have a large number of unpaid invoices? If so, then you may want to consider an option such as factoring in order to get the money you need. Companies spend too much time trying to be bill collectors than actually running their business at full capacity.
- Focus on value over price. Raging a price war against your competition is fine but it’s only going to get your business so far. Not to mention that the more you cut prices, the less money you are making. Focus on the value you are offering your customers. In the end, that will increase your profit margin faster than cutting your prices.
Making small changes in the way you handle the financial aspect of your small business can mean the difference between success and failure. Being in business is about making a profit after all, so do what you can now for a better tomorrow.