For small businesses, working capital is always a problem. This is why 7 out of 10 startups and small businesses close up shop within a year while the others limp along until they survive or join the league of failures. Many small businesses struggle to meet internal demands as well as those of their clients while working with highly limited budgets. In this article, we will be looking how best to manage your limited resources while still achieving solid results that will help you keep your doors open. These are the bedrocks of all successful businesses. If you can comfortably manage all of them, you can expect to succeed and grow.
The first thing that should be included in your budget are your business processes. What are your core business processes? We are not talking about the many things you are currently doing now. Our emphasis are on those processes that if absent, will inevitably result in the failure of your business. Identify these core processes and allocate at least 30% of your resources.
For instance, if you run a plumbing company, your business equipment will be your plumbing tools, a truck or van, a dedicated line and a small office where people can reach you. These are your core “processes”. Now, if you decide to hire five more plumbers in the hopes that you’ll grow or anticipate a new project, that’ll be a drain on your budget.
Marketing and Advertising
The next thing you want to invest in is your business’ marketing and advertising. This is the second most important part of your business. We have seen many small business owners gloss over this or only do it halfheartedly and then wonder why they are not experiencing any success whatsoever. You need to get more business coming your way.
Increased business exposure plus revenue not only means your company will survive, but thrive. So, allocate another 30 percent of your resources to marketing and advertising. Now, avoid making the classic mistake of using just any marketing medium.
One of the major reasons why small business owners see little or no results from their marketing efforts is because they often invest in the wrong or least effective medium. For instance, why advertise in the phonebook? Who uses those anymore? Year after year, small business owners pay anything from $400 to $900 for a listing in phonebooks. This is a waste of capital.
Instead identify the most powerful and effective marketing mediums. If you need with this, we would recommend signs and banners, radio advertising if you can afford it, search engine optimization, social media marketing, and a website.
If you have employees, allocate another 30% to them. People need to get paid to do their jobs. You do not want unmotivated employees. They can drag your company down faster than you can say “Bankruptcy.” Ensure that their salaries are paid, and offer them some allowances. These people will keep your doors open and your business successful. The remaining 10 percent can then go to your savings for emergencies. If you stick to this formula, you will survive and experience increased revenue, profits, and growth.