Getting into debt as a small business is unfortunately very easy. There are some unavoidable expenses when trying to start and build a business, but if debt gets out of hand, the future of your company may be in danger. The financial professionals at Fricke & Associates, LLC have helped many small businesses escape their debt and establish a strong financial plan for the future. By following these tips, your small business could get on a better trajectory for long-term financial health.
1. Take an Honest Look at Your Budget and Debt—If your company does not have a budget already, you are past due and need to establish one. A budget is crucial for keeping your business profitable. As you are looking at your business, you should be able to identify where you are spending your money and how you may be able to reduce your spending. Also, a budget should highlight your income sources, fixed costs, and variable expenses. If you are struggling with your budget or figuring out where your money is going, call in our professional team to help. We can identify shortcomings in your budget and help you develop reasonable goals to help reduce your debt.
2. Cut Back on Unnecessary Expenses—Once you have figured out what aspects of your business led to your debt situation, you can start cutting back costs. For example, if the rent cost for your office space is high, you may need to explore more affordable spaces for your company. This may require downsizing or allowing some of your staff to work remotely. Getting out of debt can require creative solutions and sacrifices. Try organizing your expenses into three categories: 1. Keep 2. Negotiate 3. Eliminate. If the expense is essential to your business, such as payroll for your employees, mark it as “keep.” If the expense is essential but you might be able to find it cheaper or negotiate the price with a vendor, mark it “negotiate.” If the expense is not absolutely essential to your business, mark it “eliminate.” Be honest with yourself about what things are truly necessary. Cutting costs can be hard, such as reducing your staff, but the longevity of your company may depend upon it.
3. Find Ways to Increase Your Revenue—We are not talking about selling your services at a discount, but rather selling more of your services. Find ways to sell more to your existing customer base and how to reach new customers. If you have one aspect of your business that is more profitable than the others, focus on that part of your business. For example, if your company is in lawn maintenance, you could reach out to see if your customers would want to add an additional service to their existing lawn service plan. You could also offer your existing customers a small reward for referring their friends or family successfully. Your happy customers can save you money on marketing while helping you increase your earning power through expanding your customer base. Offering small discounts and savings can be helpful in some cases but be careful to think sustainably and not a quick fix mindset. Also, making sure to collect your outstanding payments from customers will help improve your bottom line too.
4. Utilize Technology—There are so many applications and programs available for monitoring your company’s finances. You can even set up notifications to ensure that you are not overspending your budget. We are up-to-date on the latest technology in the financial industry, so we would be happy to help you find the best app to suit your business.
5. Explore Options to Minimize Debt—You may be able to consolidate your loans, negotiate a lower interest rate, or enroll in a hardship relief program. Some lenders will negotiate with you, especially if your business is doing okay and you have been consistent in meeting your monthly payments. Some business credit cards may have better interest rates than others, so make sure that you have the one with the lowest interest rate. You can find credit card companies that will transfer over your existing debt if you need to open a new one with them. Hardship programs are designed to give your business extra time to pay off your debt without being crippled by high interest payments. You will have to be approved, which usually requires having your financial statements and tax returns evaluated. With our financial experience, we can look at your debt and offer personalized direction.
Get in control of your debt as soon as possible. Waiting until you are in too deep can lead to having to take drastic measures, such as bankruptcy. Filing for bankruptcy should always be the final resort. Think creatively and honestly about your debt now and our Fricke and Associates, LLC team can help. Schedule a consultation to learn more!