As Diddy once rapped, “It’s all about the Benjamins, baby.” Especially when it comes to small businesses.
A great idea and savvy business strategy are crucial, but how you manage your money will ultimately determine whether your company swims or sinks. After all, a budding business can’t survive off a dwindling bank account.
To help get your business on the right fiscal foot, we’re spilling the six money secrets every small business leader should know:
1. Want capital? Do your homework.
Anyone can have a good idea, but piquing the interest of an investment company? Now that’s easier said than done.
Investors are key for receiving seed capital to turn your dreams into a reality, but you have to remember they have tons of entrepreneurs vying for their services and so little money to give.
So how do you get their attention? Research, research, research.
“I have literally talked to thousands of entrepreneurs who wanted to raise capital,” says Andrew Clarke, president of Ground Floor Partners, a business growth consulting firm. “It usually takes less than 15 minutes to decide if they are serious contenders or just dreamers.”
Before you walk into a meeting with an investor, make sure you can answer some critical questions:
- How are you different?
- How big is the market?
- What problem does your business solve?
- Who is your competition?
- How much money do you need?
- What will you use it for?
2. Focus on your needs, not wants.
Who doesn’t want a big team and a corner office in the trendiest coworking space? Good things come to those who wait, but, in the meantime, put your dollars behind your needs, not wants.
“Seven or eight years ago, I worked with a guy who opened a small [café],” says Clarke. “We developed a solid business plan and mapped out his revenues and expenses. He ignored most of our advice, and hired a huge management team. He did not need any of these people, and was out of business within a year.”
Trust us, achieving those lofty, luxurious dreams will feel a lot sweeter when you can actually afford them.
3. Skip the glitz.
Speaking of your professional needs, there’s no need to invest thousands of dollars in fancy, customized emails, websites, and blogs you don’t need right away.
“I know a small business that spent roughly $300,000 on a customized email marketing system, CRM system, and website,” Clarke remembers. “They didn’t need any of these things.”
4. Check the books regularly.
After coming up with an ironclad marketing plan, (slowly) hiring and onboarding employees, and, of course, servicing your customers, the last thing you want to do is review your finances. But keeping tabs on your money can pinpoint ways to save and better manage it.
Clarke recommends reviewing every purchase – big and small – at least once a year, if not once a quarter. Block off some time in your calendar, turn on your out-of-office response, and get to work.
So what are you supposed to look for? While Clarke says nothing is off limits, he recommends keeping a close eye on subscriptions and other small, reoccurring charges that may cost you more than they’re actually worth to your business.
“If something isn’t working and you don’t need it, just get rid of it,” he says.
5. Work with the *right* freelancers.
Let’s get one thing straight: “Freelancing” is not a euphemism for “unemployed.”
In reality, freelancers bring a lot of value to your company—as well as expertise in their respective fields—at a much more competitive rate than a traditional agency.
But before you hire the first freelancer you find, do some research and reach out to several candidates to find one who is the best fit for your business needs.
“Just your homework before hiring a freelancer, just like anyone else,” advises Clarke. Take a look at a doer’s website, and/or Fiverr profile. Do they specialize in what you need? Are their rates in your price range? Do they have other projects in their queue? Check out their portfolio. Does it align with your brand aesthetic or voice? Creatives are versatile, but most have a particular style that carries throughout their work.
Have more questions? Just ask! The best way to get a sense if someone is a good fit is direct communication. Send him or her a detailed message on Fiverr about your project, including timeline and budget. A good freelancer will respond quickly about whether or not they’re the right person for the job. Even if it’s not a match, they may be able to steer you in the right direction by recommending another doer in their network!
6. Make a plan – and ask for help.
Yes, it’s okay to splurge on some things – especially services that can evaluate your company’s worth, unearth its flaws, and build the foundation for lasting success.
“Most small business owners under-invest in research and planning,” explains Clarke. “They dive into the pool without checking to see how deep the water is.”
Clarke knows this from personal experience: After launching many failed businesses, he founded Ground Floor Partners to help people avoid the same mistakes he was making.
Sure, hiring an advisor may elicit some sticker shock, but it’ll save you money – and time – in the long run.
What other strategies for small businesses to save money? Share your tips in the comments below!