Dr Sanjay Tolani, MD & CEO, Goodwill World.
Are you an aspiring entrepreneur or someone who recently started their business? These smart decisions can help you seize growth opportunities and unlock success. Business owners sometimes find themselves in situations where they’re not in complete control; instead, they feel controlled by their finances which they are holding. As a business owner of a publicly listed organization, I have realized how vital it is to care about your investments and what a game-changer that can be towards providing you with higher financial security. Having an exit plan is another vital move, one that is often overlooked. As someone who has been through the process, with a business that was acquired, I can truly see why it’s imperative to plan it to go your way. Smart investments and strategic financial decisions coupled with a few tweaks in processes and regular monitoring can make or save a business.
1. Check different lines of credit availability
This can prove to be arduous initially but indeed pays out when one’s business picks up. Talk to your local bank and look deep for government subsidies and grants that can help your business kickstart. Lines of credit can come from a variety of sources, and one must explore them before discarding them.
2. Look for project-based funding along with angel investors and VCs
When you’re just starting, you never know where the money can come from, but you always need to be on the lookout for the same. Until one finds a long-term investor, they should always be open to project-based funding as that can really open up the investor pool in their initial days. Don’t be shy to put out a word about your business while you’re at it.
3. Restructure expenses every quarter and ensure proper bookkeeping
Initially, many entrepreneurs do not understand how vital cash flow is to a business. They think that burning cash fast will help them expand and gain market share. This may be partially true, but there’s a thin line between that and spending recklessly, the latter bearing detrimental implications.
4. Reduce financial commitments and fixed costs when necessary
Overspending can incur irreversible damages – it is imperative to keep one’s costs, expenses, and financial obligations under check at all times. Sometimes, it may make a lot more sense to outsource something that may be eating more into your finances than it should.
5. Get credit insurance, seriously
Many business work on a credit basis regularly. While credit insurance is something businesspersons often feel they may not really need, it can turn out to be quite a saviour in their time of need. As a business owner, one should always ensure their credit so that they don’t have to worry about not getting paid.
6. Don’t take on expensive loans
While it is true that loans can be instrumental in helping a business, one needs to be careful with them and try to take calculated decisions. As a rule of thumb, I’d suggest you always ensure that interest on the loan you’re taking should not exceed 20% of your profit margin.
7. If you have a job and are moving into a business, have you saved up?
Unless you have, don’t do it, your lifestyle is based on a consistent cash flow; loss of that cash flow is very stressful and can cause you to panic about the business not generating revenue fast enough. So, unless you have 18 months of your personal expenses available in liquid form, do not jump into a business full time.
8. Key Man Insurance is crucial
This may seem like something one can defer but really shouldn’t. This is going to be your exit plan in case of illness or death. You definitely need one because you certainly don’t want to, neither should you leave your family with debts and a burden that only you knew how to manage.
9. Devise an exit plan from the business as it grows
All business owners are passionate and try to learn and know how to start a business, but they often forget to incorporate an exit strategy. It is vital to actively devise an exit plan as one’s business grows so that a win-win situation can be unlocked when the time arises. It is prudent to have a plan in place to leave on a high note.
Most businesses struggle because of cash flow. That’s why an entrepreneur needs to appreciate how to shift from asset accumulation to income accumulation. It really pays to make the right strategies for more intelligent investment. That said, one should always have a plan B while actively trying not to let the need to exercise it arise. If you’re a new or small business owner, try these strategies for better cost management and to make way for smarter investments.