Four Money Management Strategies Every Small Business Retailer Needs to Know
All business owners out there have a lot of hats to wear, including that of Chief Financial Officer. Use these four money management strategies to nail this role!
Efficient money management is key to business success, and it’s how you stabilize your small business and make it less likely to fail.
Yes, your business can fail if you don’t learn how to efficiently manage its finances right away. In fact, data shows that 82% of small businesses do fail because of cash flow problems. Whether they are struggling with too little money, don’t have a well-detailed business plan, or make poor pricing decisions, small businesses fail, and it all has to do with money.
Now, managing finances wisely can be a challenge for any small business owner. Double that challenge if you don’t have a lot of know-how and experience in business finances as you’re just starting out with your small company. It’s easy to see managing business money as a terrible chore and even slip into bad financial habits that can make your business take a toll one day.
So, how do you get better at managing cash? This article is for small business retailers looking for advice on how to manage their company’s finances. Here are four money management strategies you need to know:
The first step towards healthy business finances is mastering budgeting. In fact, skip this step, and you’ll doom your business to failure. Budgeting is the most efficient way to avoid costly surprises and meet profit targets.
Now, for those small business owners out there panicking about how much time and effort they should put into budgeting, stay calm. Budgeting is not that challenging, and having a budget doesn’t mean that you need to manage every penny you spend. Instead, try to create a budget that will act as a guide to assist you in making better spending decisions. In other words, instead of seeing budgeting as a hurdle, consider it as a move that benefits your business financially.
So, how do you budget? Here are a few tips:
- Understand your financial goals
- Tally your income sources
- Overestimate expenses
- Include variable expenses
- Pay attention to your sales cycle
- Incorporate your time into your budget plans
- Review that budget periodically
Keep Business And Personal Funds Separate
Certain things don’t mix well, like your personal and business finances. One rookie mistake always made by new entrepreneurs is not knowing how to manage their personal and business finances in separate budgets.
It’s true that it may seem easier not to keep track of which expenses are for which budget. But, truth be told, that’s precisely how you invite chaos in your business and personal finances. When you don’t keep these two separated, you’re more likely to experience situations of money crunch in business because of withdrawals you’ve made for personal expenditures. And the other way around.
So, make sure that your personal money doesn’t have anything to do with your business cash. Open a separate bank account for your business and track income and expenses related to your company there.
The story needs to be the same for all your money decisions. For example, tracking your crypto investments made with personal money should be a different story from managing your digital coins bought with business cash. The same goes for your savings accounts.
Use Different Strategies To Increase Revenue
What’s the most straightforward way to have more money? Make more money! Easier said than done, right? Yet, the truth is that there are plenty of strategies you can use to increase revenue in both your personal and business wallet, including:
Invest In A Better Marketing Strategy
The easiest way a small business can increase its revenue is to sell more. To sell more, you need to attract more customers, increase brand awareness, reduce the percentage of lost deals, and increase customer lifetime value. Simply put, you need a great marketing strategy.
Investing in a better marketing strategy can help you achieve all those business goals that, ultimately, lead to more sales and increased revenue. There’s always a good time to modernize your marketing efforts, even when it seems like you’re earning sufficient money.
Cut Down Costs
You know what they say, “A penny saved is a penny earned.” When was the last time you tried to identify the areas of your business that are making you earn a smaller profit? If that was a long time ago, it’s time to do it again now.
When you’re running a small retail business, every penny counts at the end of the month. In fact, there’s likely no business owner out there who would feel comfortable knowing that they are overspending on a business area. So, another strategy to increase your revenue is to cut down your costs. Cutting down business expenses can mean tactics like:
- Cut production costs
- Reduce supply expense
- Negotiate with vendors
- Improve productivity
- Harness virtual technology
- Maximize employees’ skills
Dip Your Toes Into Investing
Another way to diversify your revenue streams is to dip your toes into investing. For example, most small businesses can buy and sell stock the same way an individual person does. And, thanks to technological advancements, even busy business owners can easily open a funding account, buy, and track stock investments in a matter of minutes.
Have An Emergency Fund
Last but not least, healthy money management also means being prepared for the unpredictable. If the past two years have taught small business owners something, it’s that saved money is really life-saving when a crisis arises unexpectedly.
Changes in the economy, regulations or the tax landscape, and even industry trends can all result in financial fluctuations for a business, and this can be really intimidating for a business without a financial safety net.
Finding the resources to invest in an emergency fund can seem difficult as a small business. Yet, there are ways to set some money aside without significantly impacting your available funds, including:
- Keep 10% or so of your annualized revenue in the bank.
- Automate savings so that you don’t think about them too much.
- Set money aside in months with high sales, such as the holiday period.
- Periodically reevaluate your operating expenses and save the money you can spare.