How To Spot A Business In Distress

It’s always a shock to see a successful company go under, but this doesn’t happen out of the blue. There are always warning signs. The survival of your business relies on you being able to recognise them. The sooner you can spot financial trouble, the sooner you can start working on a solution. Nothing good ever comes from burying your head in the sand, so it’s best to get well-acquainted with the red flags. Here are seven warning signs that you’re dealing with a business in distress.

1. Refinancing

Let’s be clear: refinancing is common and it’s not always a sign of trouble, so long as you can afford the repayments. Borrowing money against the value of an asset is a sensible way of lowering interest rates. And it helps to free up cash for your business.

It’s when you find yourself refinancing frequently that you need to worry. It indicates that your company is in poor financial health and struggling to make ends meet. What’s more, lenders grow suspicious of businesses that need to refinance all the time. And your credit score can take a hit, worsening your problems.

2. Poor Cash Flow

Cash flow is the lifeblood of your business. It’s the key to survival, investment, and growth. You need enough cash to cover your outgoings or you risk mounting debt.

Negative cash flow is part and parcel of launching or expanding your small business. So it’s accepted for a short while. But, your business can’t survive indefinitely without income. You need at least enough cash to cover your outgoings to keep your company afloat.

For small businesses, cash flow can often be unsteady – all it takes is a few late customer payments to rock the boat. It most definitely pays to be wary of premature expansion and overspending. These factors can significantly affect your cash flow.

3. Creditor Pressure

Being chased by creditors is a clear sign that your business is in financial distress. When you’re dealing with an imbalanced cash flow, it can be tempting to delay your payments. But this is short-sighted and often sparks a vicious cycle of financial problems.

It’s in your best interests to stay in your creditors’ good graces. Late payments can result in a poor credit score, which will make it difficult to secure loans in the future. Moreover, creditors won’t hesitate to chase you down or resort to legal action to claim what they’re owed. This is disastrous for any small business. So stay focused on the bigger picture and make your repayments on time.

4. Over-Reliance on Individual Projects or Contracts

A healthy business has more than one source of income. It will also have recurring income from several clients. Whilst losing contracts is never ideal, it shouldn’t have the power to break your business. If the financial health of your business depends on one source of income, it’s a sign that you’re heading for trouble.

Focusing all your efforts on securing new customers is also a mistake. Especially if this is at the expense of existing customers. It’s always unwise to antagonise your current clients. Studies show that customer acquisition can be 95% more expensive than customer retention. Increasing customer retention rates by 5% increases your profit by 25-95%. Nurturing your current clientele is vital for the financial health of your business.

5. Low Staff Morale

Employee morale is often one of the most accurate indicators of how your business is doing. It’s important to keep your staff satisfied. Reduced hours, contractual changes, and pay freezes are signs of a business in trouble. As a result, morale plummets, with further troubling consequences for the company.

6. Unhealthy Office Atmosphere

Low office morale causes productivity to take a nosedive. Absenteeism begins to rise, which exacerbates the problem. Staff spot that things aren’t going well for the business and may decide to jump before they’re pushed. leading to a high staff turnover.

7. Your Customers Know Something’s Wrong

Your customers are smart. It won’t take them long to notice dissatisfied employees. Or that they’re getting less for their money than they used to. Unhappy customers won’t hesitate to defect to your competitors. And word about your financial trouble may get around fast. This is the last thing a struggling business needs, as it can be the final nail in the coffin.

Summary

None of these signs is an automatic death knell for your business. But, if you spot several of these problems at once, it’s time to take action. The sooner you fix these issues, the quicker your business can start to recover. Don’t wait for word to get around; put out the fire before it spreads.

How to Preserve Your Startup Budget

Most entrepreneurs are familiar with the rather depressing failure rate of startup businesses. Research by Investopedia found that 50% fail by their fifth year. The same study found that one of the top reasons for this was that the money ran out. To protect your startup, you need to keep a close eye on your expenditure and stay within budget. Here are five ways to manage your cash flow to protect your cash reserves and stop burning through them like there’s no tomorrow.

Start Small

Launching a startup is exciting and as a passionate entrepreneur, you want to go in all guns blazing. But consider starting small instead.

Limiting your initial outlay will allow you to increase your spending as you gain skills and experience. This approach will boost your chances of success. Increasing your spending on equipment and product development in stages, allows you to review the effectiveness at each stage of your business growth. Then you can make informed decisions on how to proceed. This way, there is less risk involved and you won’t burn through cash so fast.

Equipment Leasing or Loans

Buying a lot of new equipment will make a dent in your budget, which is why you should consider leasing or a loan.

Leasing means renting equipment for a fixed period, often with the option to buy or upgrade at the end of the contract. This is a great option if your equipment requires regular upgrades or if you only need it for a short amount of time.

Equipment loans allow you to buy the equipment but pay it off in manageable installments. Which is great news for your cash flow. This agreement works in the same way as a traditional bank loan but it tends to be lower risk.

Resist the Lure of a Fancy Office

Every entrepreneur loves the idea of a flashy office with funky furniture and eye-catching artwork. But you don’t need this to succeed. Don’t get drawn in by the idea of an Instagram-perfect office, because this could be a serious drain on your budget. Instead, consider purchasing second-hand furniture and equipment to keep costs low. Yes, brand new luxury office chairs would be nice, but they’re hardly a necessity.

Focus less on how your offices look. Prioritise creating a comfortable environment for your employees. Your employees will be more productive if you have a quality heating and cooling system than high-end desks. It’s also worth investing in features such as insulation blinds and hand-dryers. These will save you money in the long run.

Outsource

Hiring is an expensive and time-consuming process. So you may want to consider outsourcing certain tasks. This is often cheaper than hiring a full-time member of staff. And you can scale the service up or down according to the needs of your business.

Track Cash Flow

Cash fuels your business. Without it, you’ll soon arrive at a standstill. It’s important to keep careful track of your cash flow from day one. You must ensure that you always have enough funds to continue operations. One of the best ways to do this is to prepare monthly cash flow statements. This will allow you to see how much is going in and out of your business. and identify areas for improvement. This can be a time-consuming task. It’s worth seeking the help of a professional accountant who can manage your cash flow. Then you can get back to running the business.

Summary

The best way to stop blowing through your startup budget is to be frugal and take measured steps, rather than risking all your capital at once. It’s natural to nurture big dreams about your new business. But try to focus on what is necessary so you can balance financial conservatism against growth. Second-hand furniture may not seem particularly glamorous right now. But flashy offices will be of no use to you if you run out of money.

If you’re struggling to manage your cash flow and business budget, seek the guidance of a professional accountant. He or she will help you to save money and plan for the future.

5 Common Tax Deductions that Small Business Owners Often Overlook

They say that only two things are certain in life: death and taxes. Paying tax is inevitable but there are things you can do to reduce the percentage of your income that the tax man takes. As a small business owner, the likelihood is that you’re probably paying too much tax, which is why we’ve put together a list of the most overlooked deductions to help you reduce your bill.

Of course, in order to claim the following tax deductions, you need to be on top of your bookkeeping. Get into the habit of updating your records and file all of your receipts and invoices in a well-organised system.

1. Startup Expenses

Money is usually tight during the startup phase and every penny counts, but many small business owners overlook startup costs. Don’t assume that it’s too late to claim, either; in the UK, for example, limited companies can claim relevant startup expenses for up to seven years before the business officially begins operations. Just because you’ve been in business for a few years doesn’t necessarily mean that you’ve missed the boat.

2. Home Office Expenses

If a room in your home functions as your primary place of business then you may be able to claim a home office deduction. Expenses such as gas, internet, and electricity will usually be deductible based on the percentage of your home used for work, and for how long. Therefore, it’s important to keep a record of how many hours you work each month in order to calculate this deduction.

You will also be able to claim expenses such as office furniture, although again you will have to calculate the usage portions. If you buy an office chair for £100 and use it exclusively for work, then you can claim the full amount. However, if you use it for personal reasons 30% of the time then you will only be able to deduct £70 from your taxable income.

3. Loss Carryovers

Business owners often overlook capital and net operating losses as tax deductions. It’s possible to carry these losses over into future tax years to reduce taxable income. With so many small businesses suffering due to the covid-19 pandemic, this is definitely a deduction to make note of. Loss carryovers can be used to reduce either the business’ or the owner’s income. It’s best to speak to your accountant about how your business can best benefit from this type of tax deduction. 

4. Losses on Bad Debts

If your business loses money due to a customer who won’t pay, an employee who quit after receiving advance wages, or loans to clients that your business is now unable to collect then you may be able to claim this amount as a tax deduction. You will have to prove that you have taken reasonable steps to collect this amount but have been unable to do so. Of course, this situation is less than ideal but it may help to soften the impact of a bad debt.

5. Education and Training

It’s a good idea to invest in your employees and you should be able to deduct the cost of doing so. Many business owners overlook the fact that educating and training their employees is a deductible tax expense, so keep a careful record of your spending in this area to receive a smaller tax bill.

Summary

We would all like a smaller tax bill, so be aware of these oft-overlooked deductions to ensure that you don’t end up paying more than necessary. It’s important to keep careful track of all of your expenses so that you don’t miss out on any potential tax deductions. If you’re unsure about whether an item qualifies for tax deductions, be sure to speak to your accountant or bookkeeper so that you don’t end up making a costly mistake.

4 Effective Ways to Accelerate the Growth of Your Small Business

Growing your small business is incredibly exciting, but it’s often a nerve-wracking experience at the same time. Growth requires you to invest a significant amount of time and money, and it can take a while before you begin to reap the rewards. This article contains powerful tips to accelerate the growth of your small business so that you can expand at a steady rate without running out of funds. By putting the right strategies in place, you can propel your business towards success and create the company you’ve always dreamed of. Let’s dive in.

1. Prioritise Content Marketing

In order to grow your small business, customer acquisition is crucial, and that means investing in marketing. However, a strong marketing strategy doesn’t have to break the bank. Enter: content marketing.

According to a study by DemandMetric, content marketing costs 62% less than traditional marketing and generates three times more leads. Therefore, if you want to scale up your business, you can’t overlook this method.

Of course, content marketing only works when you do it right. Posting a blog once in a blue moon won’t cut it. Good content marketing means showing up and sharing value every day so that you stay at the forefront of your audience’s mind. Furthermore, it’s important that you don’t make your content all about you. Focus on solving your audience’s problems and they’ll think of you when they’re ready to buy.

It’s important to be consistent with content marketing. If you stop and start, your business will enter a cycle of feast and famine that makes growth very difficult. However, if you stay disciplined and post content every day, you’ll enjoy a steady stream of new customers that allow you to grow.

2. Hire the Right People

Growing your business means growing your team, too. The right team will propel your organisation towards success, whilst bad hires will slow your progress and damage your bank balance, too. Steer away from cost-based hiring; it’s not the smart financial decision it may initially seem to be.

A survey by CareerBuilder found the average cost of a bad hire to be between $25,000-$50,000. In addition, bad hires slow your growth by impacting the productivity of other team members and damaging staff morale. Investing in the right team members will see a much better payoff in the long run.

When hiring, focus on attitude. You can teach your employees how to do things your way, but you’ll struggle to change the way that they think. A negative attitude is a much bigger obstacle than a lack of experience.

3. Update Your Website

Your website is your virtual shop window, so it needs to look good. If you want customers to trust, respect, and admire you, you need a website that’s functional, user-friendly and aesthetically pleasing.

You don’t need something super fancy and complicated; in fact, less is often more. A slick but minimalist website will work perfectly.

On top of this, make sure that your website is content-rich. It should contain more information than just your opening hours and contact details; that’s what business cards are for. The more videos and value-packed blog posts your site contains, the better.

4. Customer Feedback

Don’t underestimate the importance of customer feedback; it’s actionable data that you can use to greatly improve your products and/or services. However great your business may be, there’s always something you can work on, and providing the best possible customer service is a surefire way to accelerate your business growth.

Email surveys and popup forms are a great way of asking your customers for feedback. If your response rate is low, incentivise your customers to give you feedback through competitions, discounts, and loyalty points.

Summary

Whilst there’s no such thing as overnight success, employing the above strategies can help you to achieve a steady and predictable rate of growth that won’t put your business at risk. By focusing on customer experience, investing in great team members and staying front of mind through content marketing, you can make sure that your business continues to grow and thrive.

4 Reasons Not to DIY Your Tax Return For Your Small Business

As a small business owner, you may be used to taking the DIY approach. After all, you’re most likely a marketer, financial director, HR manager, and payroll administrator, to name but a few of your many responsibilities. However, although your business may be small, there’s one area that really does call for professional help – and that’s filing your tax return. Let’s take a look at four of the main reasons you shouldn’t do your taxes yourself this season.

1. You’re Not a Numbers Person

We’d all like to believe that we’re good at absolutely everything, but the truth is that not everyone is good with numbers. If you don’t have an affinity for mathematics then doing your taxes yourself is probably not the best idea.

Even if you’re competent enough at everyday calculations, taxes are a whole different ball game. Calculating your taxes is a very complex process; there’s a reason that chartered accountants have to spend so many years in training.

A simple mistake on your tax return can cause you to pay the wrong amount of tax and even result in harsh penalties that can seriously threaten your small business. It really isn’t worth the risk.

2. It’s a Waste of Your Time

Taxes are notoriously time-consuming and as a busy business owner, your time is a precious resource that you can ill-afford to waste. After all, the time that you spend doing your taxes is time you can’t spend growing your business. It’s important to sit down and think about how much your time is actually worth before you squander it all trying to figure out your taxes. Think of time in the same way as you think of money, and learn to invest it wisely.

3. Tax Laws Change Constantly

Tax laws change all the time and it can be incredibly difficult to stay on top of all the latest rules and regulations – especially when you already have a business to run. When tax season rolls around, the chances are you won’t know about all of the latest changes which could lead to you making mistakes on your tax return or missing out on new opportunities to save money.

It’s an accountant’s job to keep up to date on any changes and then take advantage of these opportunities to save you money so that you pocket as much of your income as possible. Remember that a quality accountant will always save you more than their wages.

4. The Internet is Full of Misinformation

In this day and age, the DIY approach to any task usually involves several Google searches. The problem is that although the internet is a wonderful resource, it’s full of incorrect or outdated information. As discussed, tax laws and deductions change all the time, so the article you’re reading may no longer be accurate. Furthermore, tax rules vary hugely from country to country, so you might end up making a mistake because you read advice that doesn’t apply to your business.

Sifting through all of this information and checking for veracity is a hugely time-consuming task, so you’re far better off working with a tax professional who has relevant experience within your specific industry. That way, you can have your questions immediately answered by someone who knows what they’re talking about and won’t have to waste time falling down Google rabbit holes.

Summary

The needs of every business are different, but if the above issues resonate with you then you should consider hiring an accountant when tax season rolls around. A great accountant is an investment in the financial health of your business, and will undoubtedly save you a significant amount of time, money, and stress in the long run.

Quick Ways to Improve Your Financial Performance

If you want to improve the financial aspect of your business, start with smart changes that will bring you great results.

Even when a business is doing well, there’s always room for improvement. Especially if you want your company to make more money or have better cash flow.

Here are three quick ways to improve financial performance that apply to every company, big and small.

Rearrange Expenses

Some business owners start with the idea that their business needs to make more money to cover all expenses. But what if you reverse the order and see if you can reduce your expenses?

Perform an evaluation of your expenses and see if there are areas where your business is spending more than necessary. A couple of rearrangements could make a sizeable difference.

For example, you may want to negotiate with your suppliers to get a better deal. You could also switch your insurance company if another company offers the same level of coverage at a more reasonable price.

Finally, you could discuss a periodic payment plan for larger expenses to make it easier on your company’s finances.

Offer More Payment Methods

If you’re working directly with customers, you may offer additional payment options. Doing so may let you attract many more customers at the cost of a little work.

Everyone has a preferred payment method and if you don’t have that option available, they may move on or are at least less likely to buy repeatedly.

If you don’t have a webshop, you could upgrade your site to include one and have multiple payment methods available for customers. Besides credit and debit cards, some of the popular ones you can offer include PayPal, Skrill, Google Pay, etc.

Businesses that have broadened their accepted payment methods have mostly experienced an increase in sales and customer satisfaction.

Change Your Marketing Strategy

Many businesses are spending a lot of money on marketing. Having a marketing budget is fine, but if you’re not doing great, consider downsizing or trying something else.

Social networks and blogs are very powerful tools for building an audience that trusts you. It’s also a cheaper and faster channel to get your message across. Try it and you may realise that you could cut your marketing budget in half.

You don’t have to pay for ads, either. Instead, you only spend time creating content and engaging with the audience.

Building an organic presence on social media won’t happen overnight. But if you know what you’re doing or have someone on your staff that does, a month of constant work may be enough to get your foot in the door.

Smart Changes

If you want to improve your company’s financial performance, you don’t have to do anything drastic. Small and smart changes can already lead you to where you want to be.

Every business can rearrange its expenses, offer more payment options, and get the most out of social media.

Try using these strategies for a few months and you may be pleasantly surprised by the results.

The Four Cash Flow Forecasting Blunders That Lead to an Inaccurate Financial Picture

Cash flow forecasting is a powerful tool for businesses of all sizes. To make it all the more effective, avoiding these common mistakes is crucial.

Making projections can be incredibly beneficial for controlling the financial situation in a business. Because of this, financial reports are the most important aspect of company accounting.

The forecast serves as a foundation for future strategies and plans. Unfortunately, there are some mistakes commonly made in the process.

If a cash flow forecast isn’t done properly and fails to illustrate crucial financial trends, it can prove quite damaging to a business.

In this article, we’ll examine some of the pitfalls of improper cash flow forecasting that are most likely to put a company in turmoil.

Mistake #1. Incremental Income Line

Since cash flow forecasting depends on the income from business operations, projections of the incoming cash must be handled with care. And a common mistake when it comes to this aspect is making the income line incremental.

For example, setting growth goals from one percentage to a higher one isn’t enough. A correctly done income projection should rely on such contributors as prices and volume while considering different divisions.

In this way, the forecast will better reflect business performance and simultaneously raise attention about potential issues.

Mistake #2. Inaccurate Data

Cash flow forecasting can’t be effective if it provides outdated data. Yet, many businesses fail to update their projections regularly.

If there’s a large discrepancy between the actual numbers and those entered in the forecast, issues could amass.

Updates to the cash flow forecast should ideally be done weekly. When the projection is updated that often, it might not be a perfect forecast but it will vary only slightly.

Mistake #3. Not Calculating Differences

Difference calculations can provide valuable insight and prove quite useful for devising a business plan. For that reason, a well-made cash flow forecast should include those calculations.

It’s even more efficient if they are expressed as percentages, as these will make certain expenses impossible to overlook and present a clearer picture than just considering numbers.

Mistake #4. Sticking to One Scenario

It’s always advisable to consider various ways certain business aspects can develop in the forecast period.

For example, if sales projections are overestimated, the whole projection will quickly prove unreliable. That’s why it’s vital to consider different scenarios when creating a cash flow forecast, with a particular focus on the worst-case scenario.

Many businesses avoid considering such cases, but those should always be predicted before moving forward. A realistic approach to the projection is ideal and it should be a product of considering both extremes – worst-case and best-case scenarios.

Create the Most Accurate Cash Flow Forecast

Meticulously working on the cash flow forecast will serve as an excellent platform for future business planning. Taking the relevant data into consideration and making the forecast straightforward and understandable is crucial for every company.

Although a forecast will rarely predict with absolute accuracy, it has the power to lead the company in the best possible direction.

How an Accountant Can Help Your Small Business to Succeed

They say that behind every good business is a great accountant, and it’s true! A great accountant does far more than save you money on your tax return – although that certainly is an attractive benefit. Hiring a great accountant isn’t just about remaining compliant; it’s a big step towards improving the financial health of your business and can really help with planning for the future. Here’s how an accountant can help your small business to succeed.

Save Time

One of the most attractive benefits of hiring an accountant is the relief of not having to do it all yourself. Accounting is notoriously difficult and time-consuming – there’s a good reason why qualified accountants undergo so many years of training. A great accountant will save you many man hours and allow you to get back to growing your small business.

A Smaller Tax Bill

A great accountant won’t see you pay a penny more in tax than is strictly necessary. Many small business owners, despite their best efforts, end up missing out on tax deductions or incentives. The rules and regulations surrounding taxation are complex and ever-changing, so it’s best to have a qualified professional on your side who can help you to save you as much as possible.

Accurate Records

It’s important to maintain accurate financial records to ensure that mistakes don’t compound and spiral out of control. A great accountant will ensure that your records are impeccable so that you don’t end up with a tangled web of errors on your hands or worse, mistakes on your tax return that could come back to bite you.

Financial Planning and Stability

Cash flow can be very tricky to handle and it’s often difficult for business owners to get a clear picture of how much money is entering and leaving each month. An accountant will help you to manage your cash flow and ensure that there’s always enough in the bank to continue operations, even when times are tough. This helps to keep your business stable and running smoothly. You’ll be able to offer both your staff and your clients a consistent and positive experience, maintain high levels of trust and loyalty with both.

Furthermore, a great accountant helps you to plan for the future and make sage investments at the right time. They will use their financial acumen to help you to identify areas of improvement and plot for growth, so you’re not taking a shot in the dark.

Marketing

It may not seem obvious at first that an accountant would be able to help with marketing, but they may in fact be able to advise you on where to spend your money and which practices aren’t generating a worthwhile return on investment. This allows you to focus on the marketing activities that truly drive the needle for your business and cut back on areas that aren’t serving you. Furthermore, cash flow analysis can help you decide when to launch a new campaign and get a clear picture of the results.

Financing

Your accountant can help you to understand your financing options and weigh up the pros and cons of each. On top of this, they can help you to prepare the best possible case for potential lenders so that you get the best rates possible. All of this can be enormously helpful in terms of business growth. Furthermore, if you have existing debt, your accountant can help you to handle it in the most beneficial way possible for your business.

Summary

A great accountant is so much more than a number cruncher – they function as a partner and guide to help you make the best possible financial decisions for your business. Whether you’re in the startup phase or looking to grow your business, hiring a quality accountant is a decision you won’t regret.

If you’d like to have a conversation about how I good help your small business to be more successful, please fill out this short form and I will be in contact shortly.

How to Combat Stress as an Entrepreneur

As an entrepreneur, It’s critical to know how to combat stress. Whilst a small amount of stress can be a good thing as it pushes you to work harder and propel your business forward, too much stress can take all the joy out of entrepreneurship, harm your health and hinder your productivity. Studies show that people who suffer from prolonged stress experience a range of nasty side effects. These include insomnia, low self-esteem, and frequent colds or infections. Whilst stress is part and parcel of entrepreneurship, there are plenty of realistic ways to manage it.

1. Delegate

The first step towards reducing stress is lightening the load. Entrepreneurs often try to tackle everything themselves which is unrealistic and leads to burnout. To achieve long-term success as a business owner, you have to know when to delegate. Identify which tasks need your expertise and delegate the rest. If you’re a sole trader, you can outsource certain tasks to freelancers or virtual assistants. This allows you to concentrate on growing your business. It also helps to preserve your creativity.

2. Exercise

Adding another task to your to-do list might seem counterintuitive, but regular exercise is an incredibly effective stress buster. Richard Branson, for example, has stated that his commitment to health and fitness has played a vital role in his success.

Firstly, exercise releases endorphins which help to combat stress and fatigue. Better still, exercise improves cognitive function, strengthening your memory and sharpening your focus. This means that exercise can result in a boost in productivity, which may further reduce your stress levels. Essentially, it kicks off a positive cycle that can really make a difference when it comes to keeping stress under control.

You don’t have to run miles every day or spend hours in the gym. Even a small amount of daily exercise can be useful in managing stress. If you’re pressed for time, why not try a 15-minute HIIT session in the morning to get those endorphins flowing?

3. Meditate

Meditation has been around for thousands of years and is celebrated for its stress-busting benefits. You can meditate anytime, anywhere. But it’s best to set aside a designated time slot each morning or evening so that you don’t forget to do it.

Studies have shown that daily meditation is an effective way to treat stress and anxiety. Regular meditation also increases your attention span and self-awareness. This can help you become an even better entrepreneur.

4. Find a Hobby

As an entrepreneur, it’s easy to let your work consume your whole life. But it’s important that you make an effort to maintain other interests. A fun hobby is a great way to unwind. Remember that not everything you do has to make you money.

Besides, relaxation is essential to creativity. Doing something for fun triggers a release of dopamine in the brain, a feel-good hormone that gets those good ideas flowing. So, taking up a seemingly trivial hobby not only helps to combat stress but may also benefit your business.

5. Take Regular Breaks

Many entrepreneurs are guilty of working solidly through the day. But did you know that neglecting to take breaks actually damages your productivity? If you struggle to remember when to press pause, try setting a timer on your phone to remind you to take a break every hour. Stepping outside for just five minutes can help to refresh your brain and allow you to gain a new perspective.

Summary

As an entrepreneur, it’s important that you control your stress, rather than allowing your stress to control you. Whilst it’s tempting to neglect breaks and devote your entire life to running your business, this is short-sighted and will lead to burnout. Effective stress management is essential for the long-term health of your business. So make sure you’re committed to keeping it under control.

How to Grow Your Business and Shrink Your Debts at the Same Time

Research by The Telegraph newspaper found that 60% of new businesses fail within the first three years. One of the biggest reasons for this is debt. Not only can too much debt land your business in hot water financially, but it also prevents many businesses from expanding and taking the next steps. However, growing your business and reducing your debts doesn’t have to be an either/or situation. By creating a long-term plan and putting the time you spend paying off debt to good use, it’s possible to grow your business and shrink your debts at the same time. Here’s how to do it.

1. Build Credit

A good credit score is immensely valuable to your business, so it’s in your best interests to make timely repayments. Proving that you are a reliable borrower makes your business much more appealing in the eyes of potential future lenders, which is bound to come in handy when it’s time to secure a loan for further investments.

2. See the Bigger Picture

It always pays to see the bigger picture in business. Looking at today’s costs and profits isn’t enough to ensure effective financial management. You need to consider how costs may change down the line and carefully estimate the returns you’re likely to see on your current investments. Of course, it always pays to be conservative when calculating your profit margins in order to prevent overspending.

Long-term projections allow you to manage your debt effectively and carefully balance repayments with investments and other expenses.

3. Prioritize Your Debts

Take a careful look at your debts and prioritise the account with the highest interest rate. It’s worth paying more than the minimum if you can, as this saves money in the long term that you can then use to settle your other debts more quickly, too.

4. Automated Payments

As a busy business owner, it’s all too easy for payment deadlines to slip your mind. Setting up automated repayments is an easy and convenient way to avoid this. Some lenders even offer discounts as an incentive to set up this service, so automated payments could save you significant money over time, not to mention stress.

5. Debt Consolidation

Debt consolidation is the process of combining multiple loans into one. It means taking out a new loan to pay off all of your existing debt so that you can then focus on a single account. Debt consolidation loans can lead to a short-term dip in your credit score, but you should be able to reverse this so long as you keep up with repayments. This option may not be suitable for every business but it’s certainly worth looking into if you find yourself overwhelmed or unable to keep track of your finances.

6. Create Cash Flow Projections

Failing to prepare for dry spells is a surefire way to accumulate debt and enter a cycle of feast and famine. It’s important to create cash flow projections so that you can manage your expenditure and create a cash reserve accordingly to tide you over when times get tough. Understanding and managing your cash flow effectively is essential for your business to stay afloat. It also allows you to identify the best times to invest and shows you when to hold back.

Creating cash flow projections can be complicated and time-consuming, so this is definitely something that you should ask your accountant for help with. Furthermore, your accountant will be able to help you understand market trends so to ensure that these projections are as accurate as possible. This in turn allows you to continue growing your business without risking further debt.

7. Cost-Effective Marketing

Marketing is an essential part of growing your business and it doesn’t have to be expensive. Social media allows you to reach potential new customers without spending a huge amount of money. However, bear in mind that whilst social media platforms are free to use, creating content does take time and resources. That being said, content marketing is still a very cost-effective way of growing your business, so it’s worth redoubling your efforts to ensure the growth of your business without spending a small fortune on advertising.

It Pays to Repay

Paying off debts allows your business to grow and thrive. The sooner your debts are paid off, the stronger your business will be. Debt can cause your business to stagnate, so it’s essential that you manage your finances effectively, and seek the help of a professional if necessary. By being smart about repayments, you won’t have to choose between reducing your debt and growing your business. Making the right decisions today will ensure a thriving, debt-free business for tomorrow.