It is not uncommon for businesses to go under. It happens to many startups each year and behind every fall there are some reasons that are fairly consistent. In the case of some, it is the stiff competition in the industry, while for some businesses it is the simple lack of motivation.
But most businesses will agree that it is the lack of finance that makes it difficult for them to survive in difficult market conditions. Following are some pieces of financial advice that budding entrepreneurs must take seriously:
The Truth About Credit
In order to secure funding, most business owners have to make use of their personal credit scores. The better the credit score, the lower the interest rates will be and bigger will be the loan that they can take away. Needless to say lines of credit and small business loans can make or break young companies.
Experienced entrepreneurs believe that there are three principles that businesses must follow and these include paying the bills on time, keeping the oldest accounts open and not carrying high balances. Carrying high balances doesn’t imply that your credit score rating will increase, it simply means that you will end up paying more in interest to the bank.
Prepare for the Unexpected
If you ask successful entrepreneurs they will probably tell you how bills never stop coming in. They will also tell you how they seem to come from the most unexpected places at the most unexpected times. You may be prepared for random spikes in labor costs, advertising expenses and vendor charges but can you ever be certain about insurance, legal fees and other unexpected pitfalls?
Let us assume that an employee slips on some liquid which is spilled on the office floor and breaks his arm. The only thing that can save a company from bearing the expenses in such times is an insurance.
You should seek the guidance of a solicitor to prepare your company for any unexpected expense such as this that may turn up when you are running a business. You should also seek advice regarding compliance with GDPR if your company deals with personal information of Europeans.
Entrepreneurs that use their personal funds to save their businesses are treated like heroes on the internet. But the stories that the internet doesn’t glorify are of those business owners who emptied their own wallets but still weren’t able to save their falling companies.
Business owners must be careful about not putting in their personal funds to save a business out of their stubborn pride. When you begin to frown looking at the balance sheet you must evaluate whether the business is still viable. As one last attempt, you can put all that you have in a marketing gambit but you should not increase the debt on your company by taking a second mortgage.
Besides separating finances you must also take the necessary precautionary steps to ensure that your future, as well as that of your business, is secured. You should put in place all the important documents and get in touch with legal experts who can give you further advice on how to protect your personal and professional interests.
Let Drive Lead the Way
Running a business successfully can be hard. But it is those founders who aren’t really fond of what they do that falter when bad times come knocking on their doors. On the other hand, founders who are passionate about their business find themselves doing everything that it takes to make it work.
Most entrepreneurs are made to believe that those who use their funds well are the ones that ultimately succeed. But it is actually those who set the right boundaries, are willing to learn from others and prepare themselves for the unexpected that are more likely to succeed in turbulent times.
If Warren Buffett is to be believed being successful in anything requires passion. If you turn to Mark Cuban for advice he will probably tell you to focus on your effort and go where it takes you.
Now we can argue endlessly whether it is passion or effort that saves a company and makes it thrive but what remains untouched by speculation is that you must love what you do. Because it is only when you fully commit yourself to a thing that you can continue doing it even when the chips are down.
Published by silv Watson