Many small-business owners are so busy trying to stay afloat that they never take the time to plan. That’s a mistake. By following these key financial planning tips, most any business can achieve short- and long-term success.
1. Reduce debt. If your debt load is large, paying it off can seem like a daunting task. The key is to stop trying to pay every creditor off at once. Instead, pick one creditor—preferably the one you owe the least to—and focus on paying that one off first. Pay the minimum on all your other debt, but put as much as you can each month toward this one bill. Then, when you pay that debt off, take the money you were allocating to the creditor and apply it, along with the minimum you were already paying, to your next lowest debt. Focus on paying just that one off. Repeat the process with your next lowest creditor and keep going until all your debts are paid.
2. Create a budget. Start by making a list of all the business expenses you pay out each month. Be sure to include your salary in the equation. If you’re in the habit of paying yourself sporadically or a varied amount each month based on what’s left over, pick a steady, realistic income figure for yourself and calculate that in. Afterwards, add in the expenses that are possible but not customary, such as repair costs for equipment, additional staff, new software or services, and the like. When you have a firm grasp on where all your money is going each month, you can create strong financial goals for your company.
3. Set financial goals. Once you know how much you need to earn each month to cover your expenses, analyze what your business brought in over the past few years. Look for any trends, such as a 10 percent increase each year, stagnate sales year to year, or even a progressive decline. After you have a clear assessment of what your business did historically, create S.M.A.R.T. (Specific, Measurable, Attainable, Relevant and Time-Bound) financial goals for the coming year:
No matter how many ups and downs your business has had over the years, you can make a giant financial leap this year. The more priority and urgency you place on your business’ financial outlook, the more success you’ll have this coming year and many more to come.