Tips on how to keep your new small business afloat
FOR the owners of small businesses, surviving the first few years is hard.
According to Bloomberg, eight out of 10 small businesses fail in the first 18 months. And with South Africa’s economy in the state it is, it is increasingly difficult for the remaining 20% of those who make it past the first 18 months to stay in business.
Cost-cutting and cash-flow management are the two elements that will help you stay afloat. We have tips to help you avoid big costs that could burn a hole in your budget: Find an office sharing space Image is important, but people are starting to appreciate that new small businesses are unlikely to have the capital to set up in a swanky Sandton office. You can visit sites such as flexibleworkplace. or theofficehub.co.za to find office space to share. Take advantage of discounts If you work with inventory, always try to take advantage of as many supplier discounts as you can. Making cash payments, or settling items bought on credit early, can save you a lot of money.
The caveat here is that rushing to pay all your suppliers at once could have a big impact on your cash flow. When taking advantage of discounts offered, be mindful of the rate at which you’re selling your stock. You must make sure the discount makes business sense and won’t leave you with excess stock that you can’t move. Manage your own marketing When you’re trying to get started, you probably won’t be able to go big on marketing and advertising. Social media is the new word of mouth, and you should take advantage of it.
Set up Twitter and Facebook accounts and use these channels to push your work out there.
You can also use website builders such as Squarespace and WordPress to get online. There are templates you can tailor to your firm’s needs at a fraction of the fee you’d have to pay a designer. Use free or cheap software Accounting packages such as QuickBooks can help you make sense of your business’s finances without your having to pay big amounts to accountants. Although it’s advisable to have an accountant to assist with tax matters, you should try to manage your own bookkeeping if you run a one-man show. Outsource non-core functions If you have non-core business tasks that need to be completed that you have neither the time nor the expertise to handle, you should outsource them. Use credit wisely Credit for business can be an amazing enabler and cash-flow regulator. But you need to be smart about how you use it. For instance, is it a good idea to take out a five-year loan to cover monthly shortfalls? Not at all. You’re paying a lot more interest on a long-term debt that you’re using to cover short-term problems.
Use your overdraft facility instead, because the interest you’ll be charged is much lower.
● Tsamela is the founder You can follow Twitter @DineoTsamela of piggiebanker. her on