Many people worry about financial security and entrepreneurs may have even more worries. Many small business owners are not only concerned with putting dinner on their, table, but they also worry about staying open, providing continuing work for their employees and growing their businesses. There are resources available to help small business owners begun to build financial security. It is important to have a solid business and financial plan, which will help your business be more successful.
Build an Emergency Fund
A small business should be working towards building an emergency fund of at a least a year’s worth of operating costs. This fund can help you when you are having a difficult time collecting money from clients or when business slows down due to the economy. You can also build up a fund that you can draw on during the slow periods in your business, which will help you to keep things running smoothly. An emergency fund will also prevent you from borrowing money, which will protect your business and personal investments if the business does face outside negative factors.
Get Out of Debt
Many businesses have a revolving line of credit through their bank. They draw on this on a regular basis for payroll, to pay for supplies and to fund the labor for large orders that will not be paid for until it is complete. However, this can be a vicious cycle and some of the profits are being taken by the interest payments you are making each month. Focus on finding ways to fund your ventures with cash, and pay off all the debt you owe as quickly as you can. This may mean that you grow more slowly, but it will put your business on solid footing, and allow you to create a business that will last a lot longer. If you have a lot of debt, it may take time to reach this point, but you can start by reducing the amount you borrow each month for operating costs and by increasing the amount you pay down your debt.
It is important to actively work to grow your business. This will help you to stay profitable. Additionally more customers means that you have a wider stream of income sources which creates a more solid financial future. However, you do not want to grow too rapidly, and then discover that your income sources are not solid. Many businesses grow too rapidly and end up closing down because they took on too much and could not handle it. If you are running a storefront business, this means only opening one new store or branch at time, and waiting until they are turning a consistent profit before opening the next one. As you expand you should still be putting towards your emergency fund and into a fund for future growth. If you can pay cash to expand you will be in a much better position financially. You may want to begin hiring new help for part-time positions so you do not overextend yourself when you take on new employees.
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Carlina Yepinski is the primary researcher and writer for networkmonitoring.org. Her most recent accomplishments include graduating from Kentucky State with a degree in communications and computer science. Her current focus for the site involves networking and free network monitoring.