5 Money Management tips for Small Business Owners
Small business owners are the backbone of our economy. And becoming one myself has been one of the most rewarding adventures of my life.
It’s full of challenges, most that go far beyond my craft. And opportunities that seem to appear out of thin air — there is never a dull moment.
I’m not one for taking the easy road or maintaining the status quo.
I’ve made a lot of business mistakes, and you probably will too — that’s okay. But you have to learn from them. You have to go in knowing that you’ll make mistakes and learn from them.
You have no choice. Because you decided, that before you started, you’ll succeed — no matter what.
Grow Before you Grow
You are always going to have a lot of work running a small business.
If you hire too early, you’re spending more than you need. If you hire too late, your business can burst into overload.
Stay calm, and think things through. You will get through this.
It’s a chicken and the egg conundrum. Which came first and which should you do first?
Before you go out and hire a new employee or upgrade your office space, just to get some breathing room– consider where you stand financially.
It’s important that you maintain a cash reserve, healthy cash flows, and flexibility.
A cash reserve, like your cash flow, should grow as your business grows. You’ll need a bigger life raft as your ship grows.
Be careful in making business decisions based solely on cash flow too. It’s a mistake small business owners lose sight of when they see their cash flow and paychecks grow. Business cycles can change and without notice. You need to be ready to adjust your business to these changes.
The added financial security of a cash reserve can ease some of the stresses and improve your better judgment.
Growth also requires financial flexibility.
Be frugal not cheap. Consider shorter terms on your leases, services or equipment that you use or rent. A shorter term lease will cost more but offers you the flexibility to move out if things don’t work out as planned. You can change locations if lease rates drop, renegotiate terms or downsize if necessary. Choosing the shorter terms on your agreements can also allow you to grow and upgrade quickly.
Growing the right way is a delicate balance between opportunity and financial stability. Error on the side of caution.
Separate Your Small Business from Your Personal Finances
Separate your small business from your personal finances. might seem like common sense and if you’re already doing it, great.
If you’re already doing it, great.
If you’re not, or questioning if you are, get organized.
A bookkeeper can help keep your business accounts up to date and accurate. You can hire someone or do it yourself. We use a bookkeeper and use Quickbooks Online.
In the beginning, we tried to do it ourselves. It took way more time than I anticipated and the mistakes take a lot longer to fix. I would call most of these rookie mistakes, but the biggest mistake was not getting a professional to help from the start.
Collaborate — not delegate. You need to know what’s going on.
Take an active role in getting organized. Your bookkeeper can cut down on the busy work and the technical knowledge of working with your books.
It may save you a bit of money because you won’t have to spend countless hours later trying to piece back your financial life.
The other half of the separation is, of course, your personal finances.
Running a good business and maintaining your financial security also means staying organized personally. As I mentioned above, you should make sure that you have a cash reserve for your business. It’s just as important to do that for your personal finances as well.
Your small business should not be a personal bank account. That about sums it up.
Getting a Mentor
A small business owner wears many hats.
That means you are expected to be more than just the industry expert you probably already are.
The good news is, there’s probably a mentor for that.
A mentor is a valuable resource that can save you both time and money. You don’t have to have just one. You can have an industry professional, marketing, business or all three as mentors.
Your CPA, Financial Advisor, Lawyer are all professionals that you can leverage for mentorship and guidance as you grow your business.
Figuring out your strengths and weaknesses can help you determine which types of mentors you should seek out. As small business owners, we each have different needs. They can point out some of your mistakes and shortcomings.
You might feel like a superhero. But remember, every superhero has a weakness and a mentor. Figuring out your strengths and weaknesses will help you fill in the gaps through hiring the right team.
Hire Right as a Small Business Owner
Hiring the right people for your organization is so vital to your success yet so many spend so little time hiring right.
The financial burden can wreak havoc on the bottom line when you have a member of your team that isn’t productive.
It can also catapult you forward in your conquests for great things. One of my bosses used to say that we were one of two things, a speed boat or an anchor. While that may be a bit critical, it quickly gets the point across in making a hiring decision. As small business owners, we need to be quick and swift with our decisions.
Hiring right is often time-consuming but valuable. Use all the resources you can to make sure you’re on the right track. A good fit for you and the company should also mean a good fit for your entire team.
Setting up interviews in different settings can uncover different sides to your candidate. Don’t limit yourself to only the office setting. Get lunch, coffee or invite the candidate to a social event with your team.
Retirement Planning for Small Business Owners
You are in business to make money and someday retire or gain financial freedom. And a retirement plan for a small business can help you get there.The options today have never been greater and you don’t have to be a large corporation to take advantage of the same plans.
Thanks to technology and innovative financial planners, small business retirement plans are both affordable and beneficial.
A retirement plan is part of the road to your financial freedom. It can provide tax deferral to investments for you and your employees. It’s also a great tool for hiring and retaining great employees.
As small business owners, you can choose between a SEP or SIMPLE IRA, Multiple Employer 401(k) Plans, Traditional 401(k) Plans, Profit Sharing Plans and a few other plans. Each plan has its different features and benefits, and you can find the right plan that fits your needs and goals.
It takes more than just a great product or service to make your small business prosper. Sticking with these smart money management tips can save you a lot of time and money.
Work diligently, keep focused and good luck.