You have probably heard of a business that began with very little resources and struggled on by for a while until the recent recession, in which they sunk causing job losses internally and throughout suppliers and customers. One such case is Woolworths an entertainments business and high street brand (though not a small business by any means, they had large premises in nearly every city and major town across the United Kingdom), their business was constantly in debt, rolling it from one month to the next for a long time. When the bank’s purse strings tightened the position of Woolworths was obvious and it ceased trading. They supplied several other companies like Zavvi (previously Virgin Mega Stores) which also ended up being dragged into oblivion.
From the outset, being frugal with your finances is probably one of the best possible practices a business on the road to success should heed, after all, a lot of businesses don’t always stop and actually consider what debts they have, their exposure to debts and how much all the credit is actually costing them.
Remain frugal, lots of successful businesses begin in basements or garages – take a look at Microsoft and Apple, they’re not doing too bad now are they? Expand when you can afford to and choose wisely according to your budget, don’t desire to have a flash location or keep up with your competitor. If you need to meet clients, this could be done at agreed locations, rather than in your basement or garage. Countless successful customer-facing businesses adopt this approach when starting.
Look after personal resources
Personal assets are at risk if you are trading as a sole trader, so it’s worth bearing this in mind when it comes to your home, vehicle, and other assets. Should your business get into trouble then these are all at risk! It is worth having a gander at business liability insurance and moving towards an LLC or other business formation to reduce the risk to your personal assets.
Plan your finances
Part of any business plan includes your costs associated with operating a business including things like utilities and rental of premises amongst others. It is always a bit of a shock when you actually ascertain the cost of doing business.
Pay taxes on time
If there is one person you pay on time, it is the Inland Revenue. They account for more bankruptcies than any single business or individual. If you miss deadlines, they will probably fine you or worse.
Clients and suppliers, on the other hand, can arrange favorable terms for payments that fit in nicely with when you in turn are paid. But ensure you stick to agreements to avoid messing their cash flow up!