As with everything in life, entrepreneurship is fraught with challenges. Financial roadblocks are no exception. Your home-based business’ survival requires you be a fully committed, eternal optimist who’s not intimidated by the potential hurdles you’ll doubtless face.
As commander-in-chief, financial challenges may seem the most daunting and stressful. So, I’ve compiled tips to help you crush the financial roadblocks that are an expected part of your business journey.
1. Have a Plan
First, have a plan. Every business, no matter how small, needs a solid business plan. It doesn’t have to be 100 pages of complicated business jargon, but your business plan should be realistic, detailed, and include the following:
- Your basic business concept
- Your strategy and your plans to implement it
- Your operating costs
- Your products and services and how they’re unique to your competitors
- The markets you’ll pursue
- Your management team and key employees (it’s ok if you’re a one-person show)
- Your financing needs
Your business plan serves as your company’s roadmap, so the information it contains should be as accurate as possible. If you know what your approximate operating costs and cash flow are ahead of time, it will help you avoid financial surprises. Need help creating one? Your local Small Business Development Center (SBDC) or SCORE mentor can help— for free. Visit SBA.gov/tools to find one.
2. Strategically Manage Your Cash Flow
According to the Small Business Administration, cash flow and low sales are the number one reasons businesses fail. Think of cash flow as the lifeblood of your business. If you hit a rough patch and your cash flow dries up, your business may be at risk of collapse.
Pay Attention to When Customers Pay
If you pay attention to when your customer’s payments are due, you may be able to avoid the surprise of slow cash flow. Try these tips:
- Invoice correctly and on time
- Offer incentives for early payments
- Communicate with your customers
If you do this, your customers may be more likely to pay you on time. And that could help keep your cash flowing!
Get Business Credit
Apply for a business credit card (or two) and use them for your short-term purchases. Try not to overspend; buy what your company needs and pay the full balance each month. That way you’ll preserve your cash for payroll, loan payments, and other financial items that you can’t put on a credit card.
Also, a business credit card is much more than a convenient way to pay for your purchases. And they offer fraud protection and a plethora of rewards.
Business credit cards can help you build business credit. Strong business credit is vital so your company can qualify for funding down the road, so choose credit cards from issuers that report to the primary business credit bureaus.
Open Trade Accounts
Vendors from whom you regularly purchase may extend you credit terms of 30, 60, or even 90-days. This smart strategy is yet another way to preserve your cash flow and build credit for your business. Just like the credit card companies, choose companies that report your payments to the business credit bureaus.
3. Diversify Your Revenue Streams
Have you heard the adage, “Don’t put all your eggs in one basket?” It’s excellent advice for chicken farmers and even better guidance for your business. What additional services or products can your company offer to diversify?
Don’t be overwhelmed by the thought of offering multiple products or services. Creating multiple income streams doesn’t mean you open numerous businesses. In other words, you’re not going to mow lawns if you’re an accounting firm. Focus on choosing income streams that complement your business and make them an integral part of the company.
Passive income streams are how your company can bring in income while you sleep. It will take your time and energy to get passive income in place. But once you do, your chosen streams should be relatively hands-off. Examples include:
- Online courses
- eBooks
- Affiliate links on your website
- Dropshipping
If you offer your customers more than one option, you’ll substantially increase your cash flow, and it will reduce your risk of dry-spells.
With these tips, you should be able to conquer many of the financial roadblocks that you’ll encounter on your road to success.
