Whatever the nature of your business, debt can become a crippling barrier and often derails smaller ventures entirely. If you want to climb your way out of financial insecurity and build a more stable future for the company, you’ll need to develop the right habits - the National Association for the Self-Employed has some to consider.
Analysis
Understanding where and how your business is suffering is the crucial first step to stemming the flow. In order to locate the problem, you need to be comfortable going through paperwork - this means reviewing financial statements, contracts, and subscriptions and taking the time to count up any additional assets and liabilities that may contribute to a negative balance.
You can do much of this work using one of the many accountancy and spreadsheet software available to business owners. The right program will offer simplified data management and provide insights on how to proceed forward, whilst automating the more banal tasks such as document analysis.
If you’re struggling to make sense of your financial statements or are not comfortable working digitally, it might be worth bringing in the assistance of an accountant. As a business owner, it’s important to get into the habit of working with financial experts and you can often enlist their help using one of the many online directories. Some accountants work on a freelance basis and hiring contractors is a habit that you’ll find is worth familiarizing yourself with moving forward.
Budgeting and Forming an LLC
Knowing why your business is losing money is only half the battle towards eliminating your debt and getting back on the rails, you also need to get into the habit of executing a budget. This could mean restructuring the business itself to accommodate a more stringent work process. Be prepared to cancel subscriptions, renegotiate or seek alternative contracts, and even let go of staff.
You may still be looking at your expenses and scratching your head. It’s true, sometimes a business owner takes all the necessary steps to reduce outgoings and still ends up fighting an uphill financial battle. In this case, the problem often lies with more intangible variables such as market disruption or worker efficiency - to address this, consider introducing new workflows, time-saving software, or even diversifying your product portfolio to better utilize the skills of your workers/meet market demands.
Sometimes, it’s beneficial to form a Limited Liability Company (LLC) - this may provide tax advantages to help during tax season. It can also result in less paperwork and reduce your personal liability if things get out of control. Regulations around forming an LLC tend to differ depending on the state so make sure to check the rules in your locale before proceeding. Often a formation service can help with this and help you to avoid lawyer fees. Requirements for forming an LLC vary by state, so your first step is to learn how to start an LLC in Maryland. This involves naming your LLC, assigning a registered agent, and filing Colorado articles of organization.
Income
A reduced budget still needs to be supplemented with revenue. If your company is not profitable then it can’t progress. There are no hard and fast solutions for increasing a company’s income but, as Sales Hacker notes, there are some general schools of thought and selling habits that can help - identifying high-value customers or leveraging social media, for example. If you’re not already, it might be necessary to invest more of your budget on marketing (BDC points out that B2B companies should aim to spend 2-5% and B2C between 5-10%).
When it comes to your existing customer base, make sure you have an effective invoicing process in place to ensure that you get paid quickly and on time. An online invoice maker allows you to choose from pre-made templates in order to create customizable documents that include text, photos, and your logo. You may also want to try incentivizing existing customers with new deals, product releases, and loyalty reward schemes.
Getting a business out of debt is about strategy, discipline, and, most importantly, hard work. Remember to develop profitable habits such as making better business decisions through analysis, budgeting and operating as an LLC, and sticking to proven sales strategies. Ultimately, if you’re willing to fight for every inch and you can retain your composure throughout, there’s every chance you’ll make up lost ground and find success beyond.