Running your business can be a solid way to reach financial independence and take control of your own career. That said, it can have a lot of pitfalls if you aren’t careful in a time of economic turmoil. A recent poll of small businesses revealed that 53% of owners are worried that the current state of the inflation may force their businesses to close.
After all, even major chain stores across the United States like Walmart, Whole Foods, and Starbucks have started seeing thousands of closures in big cities in 2023. Despite there being millions of new business applications coming in every year, more stores close than open in the world of retail.
If you want your business to be one of the success stories, then you need to make sure your finances are in order. It’s good to know the key reasons so you know what to look for before you launch.
1. Proper Financing Options
You need to have a clear picture of what your credit is, along with any financial obligations, outstanding debts, and potential lines of income. This will allow you to figure out what your options are in terms of financing. You can usually secure financing from investors or try to get a business loan, but these entail getting your credit checked.
There is a major difference between hard vs. soft credit checks, and you’ll likely have to deal with the former for major financing avenues regarding your potential business. A hard inquiry will subtract a few points from your credit score and stay on your credit report for a while, so it’s also important to check if you can afford to have this temporary dink. A proper business loan can go a long way, so you’ll want to ensure that you’re not doing more harm than good by pursuing one.
2. Maintaining Cash Flow
When running a business, you truly need money to make money. More than a simple saying, this legitimately comes into play when you consider your expenses, business debts, and operational debt. Basically, you need to make sure you have good capital management and a pool of finances to take your initial cash flow from in the first place.
When you have positive cash flow, you can effectively pay your expenses and maintain any needs for your business inventory and employees. 82% of small businesses fail because of cash flow issues, so you need to get your finances in order to avoid launching at a deficit.
3. Risk Mitigation
You need to have a cushion so that you’re not just putting yourself out of the frying pan and into the fire. Starting a business inherently comes with some risk, so you need to minimize this as much as you can from the beginning.
There are tons of risks to consider, from sudden market changes, economic upheaval, unexpected disasters, malicious attacks like theft, and a sudden halt to business operations. Although it isn’t all bad news, businesses opening in 2023 are facing a landscape that is currently met with inflation, supply chain problems, cyberattacks, and labor shortages. When you secure your finances and set aside funds to prepare for such risks, you give yourself a much better chance of making it through to the other side.
4. Scalability and Development
Sure, you may already have a business plan in mind. You will still need the resources to execute it. When you are developing your business and planting the seeds for its growth, you need to have enough to adapt and attract people. This rings true whether you are getting more customers or potential new investors.
You want to be able to provide your business with some scalability. This means you can meet market demands, capture a bigger share of the market, and optimize your resources with the volume of business needed. You don’t want to be caught lagging behind and you also don’t want to be spending more than you need.
Since the government has officially ended the public health emergency protocols brought on by COVID-19, potential business owners must now focus on capitalizing on analytics, organic brand awareness, and responding to a market that has changed its dynamics.