No one enjoys creating a budget, but all business owners will agree that you need one. When you’re starting out you have to be particularly vigilant about managing your money otherwise your company will be a flop before it’s even off the ground.
Here are some tips for getting started on a tight budget and buying supplies until the profits start rolling in.
Diversify your client base
If you are beginning to see your sales dwindling and you want to keep your business rolling, one way to do it is to diversify. Here are some ways you can do it:
Use social media:Facebook and Twitter are great tools for expanding your client base. Post links to webinars, promotional videos and importantly, special offers and discounts so that your current clients will share them with their friends.
Cold calling: While social media is great, you can take a much more personal approach if you go through your contacts list and call people directly. Remember to be courteous and lively on the phone so you won’t get an instant hang-up.
Boost your PR: Make the most of free advertising in your local media. Contact your local paper and radio station and see if you can arrange an interview. Try to reach not only your loyal followers but people who have never heard of your products or services.
When you need to make a large purchase
What if you need to make a large purchase for your company to get it rolling? For example, let’s say you own a fencing company and you need to find the right powder spray booth but you don’t have the money, or you may have the money to cover it but don’t want to spend it all at once, how can you get around this?
You have a number of options. Think outside the box; don’t just immediately jump on taking out a small business loan. You might consider borrowing from family or friends, selling part of your business to an investor, or bartering your services.
Chart your cash flow
This is not as complicated as it may at first seem. All you need is good accounting software. This will enable you to create easy to view charts of money coming in through the sale of products and services, and money going out through accounts payable. The software will let you examine different time period so you can clearly see how you budget is working and where it needs tweaking. Once you start looking at these charts over a period of several months, you will begin to get a detailed picture of how your cash is flowing.
Regulate your cash flow
Try, at all times, to keep enough cash on hand to last you for six months. If you can manage this, you will always be able to make it through a brief slump without it having a major effect on your company. However, if you notice that you are having cash flow problems at certain times of the month or year, it’s possible to improve the situation without doing anything drastic:
- Renegotiate with suppliers: By adjusting your payment dates you can smooth out the inflow and outflow of cash.
- Adjust invoice payment terms: Just by reducing them by a day to two you can encourage your clients to pay quicker.
- Mind your inventory: Having inventory lying around is not helping your business, cut down on it and cut the cost of space and revenue.
- Maintain good credit: As long as you have a good line of business credit you will always have access to a short-term loan if you need one.
Collect the money you are owed
Don’t leave unpaid invoices unattended. You must be committed to collecting money on time, even if you have to chase it down. Use your software to highlight which of your clients are taking the longest to pay. In these instances, you may want to consider using an invoice factoring company. They can guarantee the invoice payments within a few days by purchasing your accounts receivable at a discount. The problem with this is if the invoice is high, you could end up paying a large percentage to the factoring service.
Use your startup smarts and get your business rolling on a budget. Put financial management at the forefront of your business, that way you’ll always be solvent and ahead of your competition.
About the Author:
Ava Horton is a business consultant who loves working with startups. Her articles can be found on many small business and startup websites.