Small businesses struggle to get funds. Loans for small to medium-sized businesses are hard to come by to say the least. However, where there is a will there is a way. There has been a long standing scare statistic that 70% of small businesses fail within the first five years. While this is largely true, it suggests that entering the game gives you a 30% chance of survival at best. I just don't believe that is the case.
A lot of the problems small businesses face are financial: keeping cash flow steady, lack of finance to sustain the business through a tough time or to overcome some business distress. The matters are usually similar and at these times the decisions these business owners make are very crucial. Sadly, often times small business owners make very bad financial decisions at these times.
The following tips will help you through that decision making process. They'll help shape your mind as a small business owner to make great business moves and to survive.
1.Cut Your Cloth Smaller Than Your Size
Don't do everything you can afford to do immediately you can afford to do them. Small steps taken consistently become a long walk. Small businesses are often started with such zeal and passion that they want to become a phenomenon so fast they forget that even the military has to mark time sometimes when they advance.
The emphasis should not be on investing so much money too quickly, it should be on doing the little you do at the optimum. You grow more sustainably not by wanting to grow so bad, but by becoming known for being so good at what ever stage of growth you are at.
Don't start looking for investors just yet. Don't buy all the new office equipment if the old ones will work. Don't look for a better and more expensive office space if you can work what you have a bit longer.
I know you can pull it off, but hold off just a bit.
2.Notice the Small Things
Notice the employee that is exceptionally good, the ever smiling receptionist who seems to get people talking about personal things after a visit. Notice the grumpy secretary and learn of their grievances. One of the greatest financial keys of the small business owner is his ability to keep all his staff happy and productive.
Is this a financial key? You will know just how much of a financial key it is when you realize how much business a grumpy secretary is losing you and how much a cheerful receptionist is gaining you.
Also notice the small figures. There is a great amount of difference between $198.37 and $198; those 37 cents matter a lot. You can't get big if you think there is such a thing as "small money". Plug all the leaks and take every cent seriously.
3.As Much as Possible, Avoid Bank Loans for Now
So many times you put in a huge launch capital and the business gets to stand and just when you expect to start reeling in the profits, you find out that publicity is not a one off investment, you find out that there is maintenance of equipments and payments of rents and the profits are just not cutting it yet.
Explore other creative ways of keeping cash flow running at the initial stage. Try peer to peer lending, crowd funding systems, anything that gets you to avoid the restrictions of bank lending.
Measures like invoice factoring are amazing small business funding measures, because you aren't really going outside your business to get funds. It runs within your business and you still get to accrue zero debt at the end of the day. Companies like factoring club can help you get the best invoice factoring companies for your business if you settle for this option.
Whatever you do, avoid bank loans for as long as possible.
4.Think Twice Before You Start Accepting Credit Card Payments
There have been many back and forth arguments about credit cards and how they shackle people and businesses overtime. For small businesses, accepting credit card payments may not be all bad, but suffice it to say that it has a few implications which may not be cost effective and favorable to you in the long run.
To accept card payments you'll first have to set up an account with an acquirer, which is a bank or other financial institution that provides payment terminals and processes card transactions for you. Acquirers charge for this service. The amount you'll have to pay the acquirer for transactions is called the merchant service charge (MSC).
You will have to consider if it is necessary for your customers. If it isn't then stick to the regular cash and cheque payments.
5.Learn How to Price Your Products and Services
The ability to get premium prices is usually tied to your ability or the ability of your sales persons to sell. Pricing goods is part art and part science. While there are factors that affect price generally, there is some wiggle room in between where you can either over price or under price and lose customers. What you need is to find the median.
There are more factors that drive sales than price; price is just one, and a high price doesn't necessarily drive away customers as long as they are made to feel they receive good value for their money. People will buy an $8000 Rolex watch over a $40 Seiko watch even though a Seiko is much more accurate.
Many times what accompanies the actual product or service makes up for the disparity in price even if only in the customer's mind. I remember always traveling a distance just to get my hair done, and yet pay way more than usual just because I loved the environment and how they treated me. That was their selling point, find yours and you can confidently charge premium prices as well.
You don't have to be part of the broad statistic. You can be a survivor if you do it right.