Do you want to hear a terrifying statistic most entrepreneurs aren’t aware of? Studies show that only one out of every ten small businesses will survive for more than their first five years. What’s more, funding alone isn’t enough to guarantee that a company will stay afloat.
There are a lot of reasons why small businesses tend to fail. The economic downturn, a lack of proper marketing, and at times, even just selling the wrong product can be reason enough for many well-meaning business owners to fail at achieving their dreams.
Though these issues are reasons why companies have failed to succeed in the past, the truth is that most small businesses fail due to inadequate finance management. Learning business money management isn’t easy, but it is doable. Here’s how to make the most of your income and maximize profit during your early stages of business.
know your inventory.
A common reason why small retail stores tend to shut down is due to inventory loss. Plenty of things can cause inventory loss, including theft, a lack of interest, or accidents. The most common reason for failure isn’t theft; it’s a lack of interest.
Having the right inventory management software can help you here. When you can keep track of what you’re selling, how frequently you need to order goods, and which goods you should order more of. By optimizing your inventory, you maximize your profit.
Don’t hire people you don’t need.
Too often, businesses will hire people for roles that aren’t crucial to their business model—or worse, are excessive. Though having a well-staffed company is great, the truth of the matter is that too many employees will drain your ability to make a profit.
Hire quality people and seek out "unicorn" employees.
Unicorn employees are some of the best assets any business can have. They are the people who do excellent work at a high rate, without being overpriced. In many cases, they also provide valuable insight that can help you prepare your company for success.
Rare as they are, they do exist. If you have a unicorn employee, make sure to keep them under all circumstances. They could be the reason your company succeeds.
Automate your B2B sales.
If you’re a business that sells to other businesses, it’s essential to streamline your sales process. The easier you are to order from, the better off your company will be. Company buyers are looking for convenience, facts, and quality goods.
The easiest way to give them convenience while keeping things customized is to get B2B order management software that does all the hard work for you. This way, you can concentrate on more pressing matters—such as figuring out how to lower production costs.
Realize when debt can be good, and when it’s out of control.
There’s nothing wrong with taking on a little debt to make your company grow. Many of the world’s top companies started with the help of a business loan, a personal loan, or even using a credit card.
The tricky thing that most people have is figuring out what’s necessary, and what’s superfluous. If you aren’t sure whether you need something, try going without it for the first couple of weeks.
Know the kind of advertising that works for your industry.
Advertising is a huge money drain if you don’t know what you’re doing. No two industries are the same when it comes to advertising, either.
Many do very well with Facebook ads, while others are best using Google’s ads. Some do well with "clipper coupon" ads. If you choose the wrong type of advertising, you easily could end up wasting money.
Always underestimate profits and overestimate costs.
Finally, remember that owning a business isn’t the same as making money. When entrepreneurs first start out, they tend to overestimate how much money they’ll make while underestimating their costs.
Life happens. Losses happen, mistakes happen, and customers who you thought were gold sometimes bail. To prepare for the best, you have to be realistic and take these potential situations into account.