Starting a small business from scratch brings many challenges to SMB-owners. From organizational and structural tasks to finances, there are many bases to cover.
Out of the features above, financial management is the most important element. If you don’t generate proper revenue, you won’t meet your business goals.
Because of that, it’s vital to adequately finance your business from the very beginning.
In this article, we’ll discuss the vital budgeting tips for successful financial SMB management
1) Draft a financial plan
There’s no proper budgeting without a financial plan and framework. Every business owner needs to know much money they can count on in the first stage of their business management.
So, follow these steps:
- Write down the amount of money you have at your disposal. For most SMB-owners, these initial assets are usually their savings or borrowings from friends or partners.
- Note down how much money you need for various business expenses (overhead costs, payroll, contributions, office rent, taxes). If you don’t include them in your financial plan, you might fall short of assets.
- Calculate the expected revenue in the first quarter or the first half of the year in question. This amount of money needs to cover all your costs and ensure profits.
- Separate your personal money from your business assets. Give yourself a salary to know exactly what’s yours and what belongs to the company.
2) Make a list of projects and payments
No matter if you’re a freelance software developer, a graphic designer or a plumber, you need to know how many clients you’re working with at every single moment.
Therefore, make a list of all the projects currently in progress. Calculate the planned earnings from each of these operations.
When negotiating business projects, make an agreement with each client on the payment rhythm. Set milestones and make invoices with due dates to make sure you don’t forget about due payments.
Once a project is completed and the client pays for all your provided services, keep the project plan and the tasks in your database. That way, you’ll have the proof that you’ve finished the project on time.
3) Attract additional investments
New entrepreneurs should find as many investment options as possible.
Some of them decide to invest their savings in business. This is a bold move because they risk their personal assets for business goals. It would be wiser to keep those savings as an emergency fund in the case of emergency.
What’s better here is to ask the local business administration for a loan. There are usually some conditions that entrepreneurs need to meet, but it’s worth trying.
Another option is to present your business idea to angel investors. There are successful entrepreneurs out there willing to invest their money in promising ventures. In this case, business owners need to clarify the legal aspects of such collaborations. Investors expect either a certain percentage of profits or an ownership share in a business they financially support. Contact a financial consultant or a lawyer to check out how to get the most of such collaboration.
Think about forming a business partnership, as well. When two or more people join their forces to launch a business, they usually have more money at their disposal, and more ideas. Again, specify the ownership shares between the partners and the entitlements to profits beforehand.
4) Reduce the overheads
Keeping business costs as low as possible is one of the key tasks for every SMB-owner. Even if you start making great income from day one, you don’t know what’s going to happen next. One month can be perfect in terms of earnings and the following one could be poor.
That’s why you need to equally behave when your income is high and when it’s low.
Limit your growth to avoid the unnecessary pressure and uncontrolled hiring. Work on your own until you figure out how things are going and how much revenue you can expect in general for your business.
Don’t pay the office rent if you can work from your home or a co-working space. The plumber mentioned above might need a place to repair certain parts. Their own garage will do for that purpose, instead of paying a separate workspace.
Use the air-conditioner for both cooling and heating instead of using an electric heater or anything similar.
If you opt for a co-working space, go to work by bike or use public transportation instead of your car.
5) Work on online marketing
Even though marketing isn’t a direct financial business operation, it plays an important role in financial management.
New SMB-owners need to promote their venture in several marketing channels to ensure proper visibility and lead generation. As they keep acquiring new clients, money will start pouring in, as well.
For starters, open a Google My Business account. It will literally put your enterprise on the business map of the world.
Launch social media business accounts, as well. Test both Facebook and Instagram to see which one brings more potential customers. Use LinkedIn to connect with other business professionals.
Build a relevant and impactful business website with informative content. As the web design specialists from a Web design company in Houston explain, you’ll acquire more clients if they keep coming back to your website. The more knowledge and experience you share that way, the more potential clients you’ll attract.
Finally, interact with your clients to see how you can help them and ask them for their feedback to improve your offer.
Starting out as a business owner requires serious financial discipline and planning. In that light, include all the sources of finances in your financial plan and note down potential investments. Make a plan of your existing and future projects to always know how much work and money you’ll be counting on. Don’t spend more money than necessary and reduce the overhead expenses.
Last, but not least, let people know about your business via different digital tools. ž All these aspects will improve the financial aspect of your small business and ensure proper growth.