Small business is big in B.C., according to the most recent data from Statistics Canada. Up to 98% of all businesses in B.C. are small businesses with over half sole proprietors and 47% with fewer than 50 employees. Most of these are micro-businesses with fewer than five employees.
With thousands of small-business owners opening their doors each year, small business is clearly on the rise. But unfortunately not all of these businesses will last beyond a year.
Here’s what you can do to give yourself an advantage during this pivotal time so that you’re toasting a glass of champagne on your business’ first-year anniversary.
1. Know your numbers and manage your cash flow
Businesses prosper or perish based on how the finances are managed or mismanaged. Keep a handle on costs at all times to see where you can trim and where you’ll have to make changes if cash flow should tighten. Monitor your receivables and stay on top of overdue payments. If you have suppliers, try to match your payment terms with theirs so cash comes in as payments go out. At the same time, see if there’s a gap between what you’re charging and what the market is prepared to pay. Or whether keeping prices steady will help increase volume and revenue.
2. Polish up your credit rating
A wise man once said, “Dig a well before you’re thirsty.” Do you have access to adequate credit? The time to secure it is before you need it. It’s easy to overlook bill payments, but it will negatively affect your credit rating, so pay every bill on time. Know exactly when your ongoing bill payments are due. Consider requesting a specific day of the month, such as the first or the 15th from your vendor so that it’s easy to keep track.
3. Use credit to preserve working capital
It’s important to avoid using capital to pay up front for long-term fixed assets, such as equipment. Your business adviser can help you determine whether leasing may be the better alternative. If buying makes sense, for example to purchase additional inventory, you may be better off using credit to finance these acquisitions.
4. Leverage your customer base
Building your list of clients, customers and even trusted suppliers isn’t easy. It takes effective marketing with time and resources to get that initial sale. So it’s worth investing in these relationships by going above and beyond to exceed their expectations. If you do, they will become not only repeat customers, but also excellent sources of referrals and reviews. People trust their friends and even acquaintances’ opinions more than the best advertising. In many industries, referrals can produce the lion’s share of your clients and customers. How can you develop a formalized referral system to help grow your client or customer base for your business?
5. Take on only what you can deliver
Accepting a contract you know you’ll have trouble completing could potentially do more harm than good if you don’t deliver as promised. Also, avoid moving outside your core competency. Profitability is linked to doing what you do best. Consider outsourcing or, as difficult as it may be, declining a contract that exceeds your skill set. This way, you’ll maintain your valuable business reputation and relationships both in Year 1 and for the years that follow.
6. Protect your intellectual property
Did you or your business come up with a valuable innovation? An invention or particular visual feature, such as an industrial design, can be protected by a patent. You may also consider protecting your brand with a registered trademark on words, logos, product and service names, slogans and more. This gives you exclusive rights. Protecting your brand and the products and services it stands for is critical to your future sales. If you don’t protect your trademark, a competitor could use it or something similar, which could confuse your customers. This value of a distinctive brand that’s trademarked can become an important part of the valuation of your company when you decide to sell.
7. Your business plan: review, revise, repeat
It’s important to start with a plan so you know what you need to do next. But in your first year especially, you’ll likely alter course many times over. You’re learning as you go, so be willing to reassess your plan and adjust when necessary. It’s always good to go back and look at your original business goals. Are you on track? Do you need to revise them? What information do you have now that you didn’t when you first wrote your business plan? Don’t fall into the trap of feeling confined to only doing things the way you initially planned. Remember, there are many paths that lead to success. Your stable of expert advisers, including a financial business adviser, can be very helpful in that regard.
For more articles on how to manage and grow a small business, please visit BlueShoreFinancial.com.