Some of these apply to small business owners, some apply to all.
None of this is rocket science, but it’s amazing what you might lose sight of when you are overwhelmed by your business. I see many small businesses. Some are very successful, others struggle to survive. Here are some of the common traits that I see in the successful small businesses.
- Cash is king. Always know how much money you have in the bank. Spend the 15 minutes each month to reconcile your checkbook. Overdraft fees are like burning money.
- Keep inventory low. Turn your inventory fast. I see so many businesses that are profitable, but have no cash because it’s tied up in inventory. I don’t care how great a discount you are offered – don’t be fooled into buying an outrageous amount of stock to get a great discount.
- Run away from losers… when you are stuck with too much inventory or a bad stock. Know when to say goodbye, cut your losses and move on.
- Hire good advisors. Every good business has a good lawyer, accountant and banker. Get one of each and take advantage of these great resources.
- Have a cash flow plan. When you started your business you probably had a financial plan. For most of you that’s that last time you ever looked at this document. You should revise this each year as you learn more about your business and make changes. Make sure you know where you are going.
- Save money for your retirement. After a reasonable start up period you should be able to save for your retirement. After all – you are in this to do more than just pay today’s bills. If this is not the case – either fix the problem and save or do something else.
- Insure yourself properly. No one likes to spend money on insurance. No one likes to see their business burn down or their spouse pass away and realize they let their policies lapse. Do not ignore this. There’s a reason it exists.
- Do not commingle funds. Remember – this is a business, not your personal checkbook. You may lose the protection of being a corporation or LLC by doing this.
- Pay your taxes – in full and on time. No one likes to do this, but taxes happen whether you like it or not and whether you are successful or not. If you cannot pay in full and pay on time – it’s a sign of trouble.
- Maintain proper records. Tax returns, sales journals, invoices, contracts, wills..the list goes on. If you are not sure what to do, how to do it or what to keep – ASK!
- Capitalize your business properly. See 5 above. Have a realistic idea of what it takes to start and when you can afford to take money out.
- Establish the ground rules. Every game has rules. When you have a partner, have your lawyer and accountant draft an operating agreement. This will save you major headaches and dollars in the future.
- Establish controls over cash and spending. Employees will not spend your money as carefully as you will. All the cash does not always get into the drawer. The right controls and procedures can eliminate this problem.