Small business owners lacking surplus cash stuffed in a mattress or buried in the backyard are anxious, fretful, and stressed. And, rightly so! Anyone who is ever interacted with a financially-desperate, white-knuckled business owner has felt their desperation. It's not pretty. If the recent volatility in the economy has taught us anything, it's the need to build financial reserves.
Regardless of the current financial situation, anyone can begin shoring up financial reserves immediately by following these five simple steps.
- Prepare a budget.
Every business owner knows how important it is to prepare a budget. That doesn't, however, always translate into taking action. A detailed budget means smarter decisions. And, who can't use some of those, right? Use your accounting software to help you with this task.
- Plan your sales forecast.
Projecting sales can sometimes be problematic. No matter how well you plan, it's impossible to predict the future....unless you have a crystal ball. Even so, it may not be as difficult as you think. By combining your past trends with your projected growth, you're sure to create a forecast that will be closer to reality than those predicted by quirky meteorologists.
- Reduce expenses by 50%.
Nothing ignites ingenuity like the challenge of figuring out how to drastically slash expenses. Needless to say, the wobbly economy has been helpful in reducing expenses but there may be some additional areas that could use a little trimming.
- Evaluate your pricing.
I'm sure it doesn't come as a surprise to learn that many small business owners under-estimate their value and, consequently, end up with inaccurate pricing. Business owners who under-value themselves and their services can end up resenting their business and their clients. That's just downright ugly! Before you become "that" business owner, why not re-assess your pricing structure. More often than not, pricing is an inside job.
- Save 10% each month.
Ah, what a concept. As studies have shown, the savings rate in America has gone up considerably since October 2007. Good for us! That extra 10% allows you to take advantage of unplanned opportunities and unexpected challenges, like slow paying clients, and make the needed investments to remain competitive.
Simple tactics? You bet! East to implement? Not always. It takes time and discipline to create some wiggle room in your financial picture but when you do, it reduces your stress, makes you happy, releases your creativity and opens you up to attract the kind of clients you look forward to working with. And, isn't that what you're really after?
Your turn. Tell us what you do to build financial reserves.