The pandemic wasn’t kind to many businesses . . . and while the economy has been slowly recovering in the last three years, business as we once knew it will never be the same. If you’re a small business owner, you’ve had to adapt to a new normal and learn how to operate successfully—despite the ups and downs of an economy on the mend.
These days, entrepreneurs everywhere are finding that the new normal is here to stay. According to The Bureau of Labor Statistics, only 45% of new businesses make it past the five-year mark.1 Whether you’re new to the business world or a seasoned veteran, knowing how to manage small business finances is the key to success. Here are a few tips that can help you weather the ups and downs of a post-pandemic economy on the mend.
5 Ways to Manage Small Business Finances
If you’re a business owner (or plan on becoming one) in this post-pandemic economy, it’s important to get your finances in order at the start. Here are a few helpful tips to keep in mind.
1. Keep things separate.
Keeping your business finances separate from your personal finances is a golden rule of managing small business finances. One of the first things you should do when starting your business is open a separate business account. That way, when push comes to shove, there’s no blurred lines between what’s yours and what the business owns. The cleaner your records, the better.
2. Hire an accountant.
You may be great with numbers. But hiring an accountant for your business to keep your books for you will be helpful—especially since they’re not juggling every other aspect of the business. This person will be able to give you the hard numbers and facts about how the business is doing, keep clean records, and make life easier for you in the long run.
3. Keep an emergency fund.
We talk about how important it is to keep an emergency fund with your personal finances. Well . . . it’s just as important to plan for emergencies with your business. No one can guess what’s around the corner, but you can prepare well for it. Keeping a business emergency fund will help you weather whatever storms are on the horizon.
4. Reduce Your Liability.
When you own your own business, you want to be sure to protect yourself from the unexpected. That’s where liability insurance comes in. This type of insurance protects your personal assets if a lawsuit were to arise.
5. Grow slow.
It can be so exciting to see a surge of growth—especially when you’re just starting out. And as entrepreneurs, it’s hard not to let our visionary dreams take over. But if you want to be a business that makes it past the first five years, you’ve got to grow slowly and remember that business is a marathon, not a sprint.
6. Cash flow your business.
Starting out your entrepreneur journey in the red can be tough. Not only does it mean you’re already in debt, but it means you owe someone else money that you haven’t made yet. When you choose to grow slowly, you’re also choosing to grow at the speed of cash. When money comes in, you can use that to take a risk for your business, build on what you have, or try selling a new product in hopes of growing the business. Building at the speed of cash can be frustrating at times, but it will ensure you don’t spiral into debt later.
Being an entrepreneur can be lonely at times and there’s always a decision to be made for the business. Get someone on your team to help you as you navigate your business. A SageSpring Wealth Advisor can help. Reach out today—we’d love to help you manage your business finances.
