2020 is here, which also means goal setting and resolutions are underway. If you’re a small business owner, do you set New Year’s resolutions for yourself?
If this isn’t something you’ve done in the past, now would be the perfect opportunity to start fresh, assess your business, and determine areas of improvement.
With January being Financial Wellness Month, we want to encourage small business owners to take their finances more seriously this year.
Use these tips to help determine the areas you want to improve on and the resolutions you want to make for your business with the purpose of being healthy financially.
Monitor Your Finances
According to Business Insider, 23% of small businesses fail because they don’t have the right team running the business. There are so many moving parts when operating a business that you can’t expect to do them all yourself, especially when it comes to your finances. It’s important that you have a team in place to make sure you’re organized and financially stable.
Luckily, nowadays there are countless high-tech options to help create that convenience factor that so many are longing for. Take digital banking for example, in 2020 digital banking will most likely be a growing trend for small business owners all over the world.
Make sure you find a business banking option that caters to startups and small businesses as it will help simplify and eliminate the pain and cost of financial management. You can monitor your spending, transactions, and have everything organized for your bookkeeper.
On top of finding a bank for your business, it’s important that you understand how to keep your business’ finances separate from your personal finances.
Don’t Neglect Personal Finances
Running a small business is no walk in the park, but small business owners are some of the most talented and hardworking individuals. With that being said, they have the tendency to invest all their time and effort into the success of their business, which can be great!
However, this can also result in other aspects of their business being neglected, such as their personal finances.
Starting out, small business owners should be prepared to work for free in order to support their business and employee needs. What most don’t realize is that they should determine their salary ahead of time by calculating any personal finances. Then, once their business is profitable, they can start paying themselves the salary they deserve.
When this happens, take the following into consideration:
- The cost of your mortgage.
- Any monthly bills such as student loans, car payments, credit cards, etc.
- Groceries and any other tedious everyday purchases.
According to the U.S. Bureau of Labor Statistics, roughly 20% of small businesses fail within their first year and 33% will fail within two years.
With that being said, it’s important to keep your business finances separate from your personal finances by opening a separate savings account and setting up a retirement plan. This way, if your business fails, you have some cushion to live comfortably.
Conduct an ROI Analysis
Entrepreneurs and small business owners tend to lack expertise when it comes to calculating a return on investment (ROI). ROI is a key performance indicator for businesses to measure their success over time and to keep their finances in check. Using the right cash flow method is important when determining your profitability with expenditures.
As previously mentioned, we believe that digital banking will be a trend for businesses in 2020, but there are several tools and technology options out there to help simplify other parts of a business owner’s workflow.
Take our mobile app for financial wellness for example, it’s free and provides owners and employees with access to financial resources and tools.
Investing in technology is not cheap, which is why it tends to get pushed down the to-do list for small business owners. However, even if you think it may be too big of an expense, in the long run, it can provide value and bring in the cash.
The best thing that you can do for your business is to invest in it. As we already stated, you will learn quickly that your income is non-existent in the beginning.
The term “investment” often sparks fear in any startup, freelancer, and entrepreneur’s mind. This is because the first thought you’ll likely have is, “What if I fail or lose all my money?” This is especially true when your finances don’t match your business plan and goals. It’s important you do your research and find areas where investing makes sense.
If you’re looking for investors, you need to take into account that you aren’t the only one looking for certain qualities. Investors will make sure you meet their expectations as well. Investors are looking for freelancers and small business owners who set clear expectations, stand by their word, communicate, and deliver. If both parties embody these qualities, you’ll be able to build trust and create a healthy partnership.
We hope these tips not only helped but inspired you to create resolutions for your business this year to promote financial wellness.
Here’s to a happy and healthy new year!