Owning a small business can be stressful, because small businesses are at a much greater risk of failure than more established companies. Many small businesses fail within their first year, so your strategy during this time is of the utmost importance. Your first year of operation will be the test that will determine your long term viability. Here’s what you need to know in order to avoid bankruptcy in your small business.
The Importance of the Supply Chain
Effectively managing any company depends on creating the most effective supply chain possible. This is particularly true in the case of retail stores that depend on a constant supply of consumer goods to sell, but every kind of business needs things like machine parts or something as simple as pens and paper. Any supply chain starts with a manufacturer. The manufacturing stage of the supply chain is where raw materials are forged into products in a factory setting, and this forms the foundation of any supply chain. Manufacturers typically sell these products to distributors, and distributors resell those products at a higher price. In exchange for that markup, distributors typically enhance these products in order to make them more appealing to retailers. The most important factor when arranging your supply chain is reliability, because slow response times and late deliveries can create major problems for your inventory. Finding the best prices from distributors or wholesalers is also crucial, but sacrificing quality or responsiveness in favor of cutting costs is ill advised.
Maintaining Your Cash Flow
In a similar vein to maintaining inventory, your company will also need to maintain cash flow in order to cover the costs of doing business. Business expenses are also known as overhead, and they constitute part of the trifecta of business finance. The basics of business finance are that your revenue minus your overhead results equals your profit, and so one of the most crucial ways to manage your cash flow is to reduce your overhead costs and increase your revenue. This can ensure that you always have the necessary funds with which to cover the costs associated with operating your business. If your business uses invoices to receive payment for its services after the fact, that can throw a wrench into the works. Payment for those invoices can take upwards of two full weeks, and that can be a major issue for smaller businesses who need every penny to get by. Invoice factoring can alleviate this problem by providing immediate payment in exchange for selling those invoices to a factoring company. This service has an associated cost, but it can be worth it for the sake of maintaining cash flow.
Stay Organized
While it may seem silly, one great way to survive your first year is to simply have a firm grasp on what’s going on around you. The primary challenge of running a company is organizing several factors at any given time. For example, you’ll need to delegate responsibilities to your employees, and you’ll need to keep an eye on finances. Anything you can do to take some of that pressure off of yourself will make your entire operation much smoother. One way to accomplish this is to hire an accountant to take care of the financial record keeping. While this runs counter to reducing expenses, it pays for itself by giving your brain some breathing room with which to manage the rest of your workload. Organizational apps are also essential, because they can render a job like payroll obsolete and otherwise provide a simplified overview of your business’s inner workings.
Prioritize Marketing
Marketing is an essential part of commerce in general, but like so many things, it is crucial for the growth of a small business. That means that an effective marketing strategy is an imperative for small business owners. Amateur marketing may have to do when your budget is on the small end, but professional marketing is preferred when possible. Local businesses that produce advertisements that look and sound cheap are more likely to fall on deaf ears than an ad with higher production values, for example. On the other hand, marketing is much more complex than advertising alone, further increasing the demand for experienced marketing professionals. Branding in particular can make or break a small business, because your brand conveys the essence of your business to potential customers. If consumers don’t find your brand compelling, it will be much more difficult to bring in new customers.
Running a small company is no easy feat. The thrill of pursuing your fortune under your own volition is met with the pressure of having to be the one to make the tough choices for those who depend on you. However, there are many ways that you can shift things in your favor, and these tips are a great place to start.
