Solid financial planning is an essential element in any small business. Read on for a look at five important considerations that any SME start-up should consider…
There’s no doubt that any new business needs a real mix of attributes to succeed in this challenging economic climate. If you’re thinking of setting up your own SME first off you’ll want to have a lot of things going for you.
A product or service that people are willing to pay for, a sound understanding of the business arena you’re preparing to enter and a strong commitment to your company are among the many vital ingredients to success. However even with all these things going for you, at the end of the day the success or failure of your business rests on cold, hard cash.
Money is the lifeblood that’ll keep your business alive and if you don’t have enough of it, or you can’t control it and it flows away, you’re enterprise is dead in the water. With that in mind, we’ve picked out five of the best ways for you to ensure that this doesn’t happen.
1. Simplify each financial step
It’s easy to become intimidated by the prospect of financial planning but the process is vital to your SME. Unfortunately there’s no escaping the fact that a sound understanding of financial fundamentals is the bedrock of business success but this doesn’t have to mean you’re stuck with a head full of figures you don’t understand.
If you break down any financial plan you can distil some fairly basic and simple rules rooted in manageable sums. Underlying it all is the simplest calculation of them all what’s left over after you subtract the amount you’ve spent from the amount you’ve made. Keep this in mind as you carry out your financial planning everything links back to it.
And when you are in need of help use the enormous resources at your fingertips resources which are often literally at your fingertips! The internet has vast resources, including a great deal of information from the government, which aims to help businesses like yours, so use it.
2. Optimise your banking services
One of the most important business relationships you’ll ever have is with your bank it might not always be a harmonious but you should make sure it’s as productive as it can be. Remember when dealing with your business banking consultant, your success is in your bank’s interest.
Take advantage of any advisory services that your bank offers and take advantage of products such as invoice financing which can release cash to your business quickly if you find that invoicing clients is a time consuming process. Remember if cash is lifeblood and you want to enjoy a vigorous flow into your business.
3. Spread your funding net wide
There will likely be times in your business journey when you’ll need to acquire more cash than you have available maybe when you’re starting up, or when you need to fund an expansion. When you do, that relationship with your bank will be absolutely vital as they could well be your first port of call when you go looking for that money but they are not your only option.
There are other funding avenues available to you, such as crowd funding or finding a private investor to back your business. In all of these options and the bank as well for that matter you’ll need to persuade the potential source of your cash that both you and your business are a credible investment.
Make sure that you present yourself and your business plans in a way that inspires confidence there’s no room for hiding at these important occasions.
4. Diversify your income streams
Relying too heavily on one source of income is a potentially risky strategy for any business so always be on the lookout for ways you can find new income streams, and bolster less productive ones. Look at where the money is coming into your business and identify the most profitable different revenue streams.
Can you learn anything from these that you can apply to your other business interests? Or can you find related, but different sources of income that’ll give you alternatives if the main ones fail? These are important considerations and you should always be open to developing new ways to get money into your company.
5. When it’s time to spend, spend
There is a temptation to remain timid when business trading conditions are tough but this is asking for trouble. While it’s important to consolidate your financial interest when times are tough, and it’s true that overreaching in business can be fatal, you should not be afraid to spend if it’s appropriate.
If you’ve identified an area for growth then do the financial projections required to assess how suitable expansion is then move on them. If you’re going to forge a successful business you have to maintain the ambition to expand when you need to and as you do don’t be afraid to delegate. Micro-management works up to a point but if you enjoy success there’ll come a time when your business needs outstrip your capabilities and to continue growing you’ll need to put your faith in others.
When you reach this point have some faith in your judgement and don’t allow yourself to be limited by self-imposed constraints. These’ll strangle your operational capabilities, your cash flow and finally your business itself.