While hundreds of new businesses emerge every year, only 80% make it to the second year. One of the main reasons behind business failure is poor financial management by new entrepreneurs. Since small businesses are lean on finances, their success of failure is fully dependent on how entrepreneurs handle matters finances.
With most entrepreneurs opting to go into business without adequate cash flow, a cash crunch may often be unavoidable. Nevertheless, there are proven ways that you can use to pool your business capital and keep it up and running.
What is Business Capital, and Why Do You Need It?
Business capital is the financial asset(s) needed for a business to leverage growth and achieve financial stability. It can take the form of:
- Company cars
- Brand names
Capital is an essential tool for starting and maintaining a business. You’ll need it to perform business operations like paying employees, paying rent, effective marketing, and paying suppliers, amongst many others.
Effectively managing your business’s capital is key to its longevity. One way of doing this is by keeping a record of the financial choices you make. This will help you plan for the future. You will also learn from your past financial mistakes and find better ways of financial management.
How Can a Company Save Money?
1. Negotiating with Vendors
Donald Trump, a successful business mogul, can swear on the power of negotiation. In his book Think Like a Billionaire, the successful real estate entrepreneur boasts of his negotiation prowess and how it has helped him save money and remain in business for decades.
The art and science of negotiation is powerful. It can make you save money you would have otherwise lost easily- the opposite is also true. Your vendors purchasing price does not have to be final, counter it with a better deal.
Remember, vendors want to remain in business just as much as you do. Many are more than willing to negotiate lower prices than lose a loyal and regular customer. Take advantage of this. There’s nothing you stand to lose by negotiating.
2. Tracking Prices and Bulk Purchases
Most successful entrepreneurs have mastered the art of making purchases at the right time. And the right time isn’t necessarily when the company needs it; it’s when there are huge discounts on items that the company needs or will need in the future. From stationery to furniture to machinery, you need to be on the lookout for discounted prices constantly. Taking advantage of these price drops will help your company save so much.
3. Purchasing Used Equipment
Remember, the goal is for your company to save as much money as possible. So forget the flashy brand new office equipment and go for equipment that has been used but is still in good condition.
Many companies are seeking to dispose of their assets to the highest bidder. You can also look out for adverts of used equipment by local auctioneers. By buying second-hand equipment, you may end up saving more than 50% of what you would have spent on brand new equipment.
4. Exchanging Goods and Services
Even in this postmodern era, a little barter trade can make a huge impact on the financial condition of your company. Instead of paying for everything in cash, consider the option of exchanging products for products, services for services, or products for services. Be on the lookout for suppliers who have something you need and are also in need of the products and services your company offers.
If you are a digital marketing company, for example, you can build a long-lasting brand for a client contracting firm whose services you also need. This way, both companies will benefit and you will conserve cash in the company.
David Fling, the owner of three successful ITEX trade exchange franchises, has seen firsthand the benefits of exchanging goods and services. In an interview with SmallBizLady, he responds that through barter trade, companies get to “convert their excess capacity, inventory, and time into profits while reducing cash expenses.”
5. Staffing for Peak Seasons
Have you ever walked into an almost empty store that is fully staffed? That is what we would call a complete waste of resources.
Observe the high and low sales seasons for your company and ensure you have adequate staff. Over Christmas and Thanksgiving holidays, many companies observe record-breaking sales while at the beginning of the year, sales are usually slow.
Consider having just the right number of employees for every sales season. This will help you save money that you would have otherwise used to pay too many unproductive employees.
6. Saying No to Credit Transactions
Many businesses have gone down and under because of unpaid or delayed debts. While selling your goods on credit can give you a competitive advantage and increase sales, it is not advisable for a startup with lean capita amounts.
Allow your business to grow first before you begin to consider the option of giving credits. Even then, be sure to assess the creditworthiness of your customers before transacting on credit. The aim is to keep your company up and running. You can’t achieve this with a negative bank balance.
How Can a Company Save Money While Saving Time?
That tick-tock sound of the clock. Yes. That is money.
There’s a strong relationship between time and money. Saving on the former will almost always save on the latter. But how is this possible?
Ditch those long drives to meetings, accommodation costs, and other unnecessary costs that come with meetings.
Go virtual! Telecommuting will save your company money and time. It will also improve the quality and frequency of employee engagements, satisfaction, and productivity.
These combined will bring in more cash to the company. Besides, you save the money you would otherwise have spent on facilitating these meetings.
2. Lean Meetings
On-site meetings can be quite expensive in terms of travel and accommodation. Even virtual meetings demand a lot of time, which translates into reduced productivity hence lost money.
While it’s almost impossible to do away with meetings altogether, you can cut down on the number of meetings and the number of people attending these meetings. By keeping the headcount as low as possible, employees spend time well, and you minimize meeting costs.
3. Outsource Marketing
You may be tempted to have your company do all the marketing. However, to do it effectively, you can outsource part of your marketing efforts to experts who specialize in what they do.
For example, you can outsource PPC to an expert digital marketing agency. This will help you save both time and money that you’d have used testing different PPC strategies.
4. Motivating Employees
Create a ‘time equals money’ policy where you give employees a reasonable amount of time to complete specific tasks. You can reward employees who exhibit an exceptional value for time.
By so doing, you will develop in your employees a time-conscious mentality resulting in more productivity within the expected time durations. When you value time, you set up your company for success.
One thing that sets apart successful and unsuccessful companies is financial management. Using these six strategies will help you pool your new business capital and put your company in the frontline.
While saving money is a skill that is easier said than done, it remains possible. All you need is intention and strategy. Cutting out unnecessary expenses and focusing more on activities that will increase cash inflow will most certainly give your company the financial stability it needs.
Decide now to pool your business capital, become obsessed about getting to the top, and most importantly, remain unstoppable.
David is an experienced Public Relations manager currently working as part of the Cardinal Digital Marketing team. They are an Atlanta based Digital Marketing Agency that specializes in PPC Management.