Starting a new business can be exciting, invigorating, and liberating. Running your own small business can be a pathway toward financial freedom and independence if managed correctly. If you don’t know what you’re doing, though, it can become a nightmare of lost funds, wasted time, and even a company collapse.
The first five years of any small business are considered the most crucial. If you know how to navigate the waters of new business ownership and can survive that first half-decade, you’re more likely to have a long and profitable career. Here are a few tips to keep yourself and your company protected, financially sound, and poised for success.
You may be making all the right decisions in your first five years, but without the proper insurance coverage, one unexpected event could derail your hard work and jeopardize your business.
This is why it’s essential to prioritize comprehensive risk assessments and secure appropriate insurance coverage. This is the best way to safeguard and protect yourself against potential liabilities or unforeseen obstacles.
One option for small business owners is an 831b plan. The primary benefit of an 831b plan is that it allows you to mitigate risk more efficiently. Traditional insurers cover most risks you may face as a small business owner. However, unexpected events, such as the COVID-19 pandemic, can spotlight areas that traditional insurance fails to cover and provide coverage in those circumstances.
Additionally, this type of plan allows business owners to defer some of their income to put aside for any future risks that may arise. These funds will be available to you if some sort of catastrophe strikes.
This may seem obvious, but the actual business of running a business is important. For example, if you run a retail clothing boutique, yes, it’s important for you to understand trends, styles, and what sort of items your clientele is likely to buy. However, without proper bookkeeping, financial projections, and financing decisions, the best fashion sense in the world won’t matter. Without minding your finances, you won’t have a company to run for very long.
Effective financial management means doing the research necessary to choose vendors, set prices, and identify profitable markets. Creating a budget is essential to effective financial management. Additionally, it is one of the first and most powerful tools you should spend time perfecting.
The next most important financial management tool is bookkeeping. Depending on the size and nature of your business, bookkeeping may fall to you, a dedicated bookkeeper, or a bookkeeping company. If you choose to do this internally, you should invest in comprehensive business accounting software, maintain a business checking account completely separate from your personal accounts, and ensure your checking account is reconciled every month. It’s also important to implement a sales tracking system. This way, you can find out what’s selling, what isn’t, and how much you’re bringing in.
When running a small business, especially in those crucial first five years, it’s easy to get in the weeds with imminent goals, needs, and tasks and allow strategic planning for the future to fall by the wayside. However, it’s vitally important to put together a comprehensive strategic plan that maps your path forward. This is especially true when your company is young. Too much focus on the here and now can lead to disaster down the line without a solid plan in place
One way to make planning for the future easier is taking the time to select the right people to bring into the business. Anyone you hire should be trustworthy, have a specific skill set, and believe in your products, services, or mission. Once you have the right people, creating the right environment is up to you. Making sure your employees feel safe, heard, and valued can create longevity among your staff and help your company thrive in the long run. Constantly collecting, sorting, and analyzing data should also influence your plan.
Once you’ve done these things, you can write down your plan. When writing this, make sure to make it detailed, organized, and forward-thinking. Set measurable objectives and an actionable plan. Finally, allow room for flexibility. Businesses grow and change, and your plan may need to be altered over time. Once your plan is established comes the most important step: execute it. A plan is of no use if it’s just a piece of paper that sits forgotten in a drawer. Instead, it should be acted upon constantly, making it one of the fibers of your company’s identity.
Build a Strong Customer Base
A business, whether small or large, is nothing without its customers. Put in the work early and often in your first five years to identify your customer base and make it a priority to reach out to them and keep them engaged and interested in what you are offering.
Listen to what they want, note what products or services they purchase most, and do what it takes (within reason) to satisfy them. Always be on the lookout for new potential client bases, sources of new customers, and ways to gain referrals and new business. You’re setting yourself up for success with a strong and loyal customer base.
Starting a new small business may seem daunting at first, but following these tips and working to protect and grow your company will set you on the path to success.