Small businesses play a vital role in our economy, representing a staggering 99.9 percent of all businesses in the U.S., totaling 30.7 million. However, a significant 82% of failed businesses attribute their downfall to cash flow issues, which can largely be prevented with sound financial planning. At Citizens Bank, we are committed to seeing small businesses in our community flourish. If you’re a small business owner, here are some financial tips to help you thrive:
1. Establish a Budget and Adhere to It
Creating a budget is crucial to steer clear of debt for your small business. This practice helps distinguish essential expenses from discretionary ones across all aspects of your operations. While it’s common for 59% of entrepreneurs to utilize loans for business expansion, it’s essential to avoid indiscriminately acquiring loans and credit without a clear understanding of your expenditures. Develop a budget and stick to it, utilizing loans to trim unnecessary expenses and focus on long-term investments like staff and technology upgrades.
2. Build an Emergency Fund
Prepare for seasonal fluctuations or market downturns by setting aside funds for emergencies. This provides peace of mind when faced with setbacks, a common occurrence for many business owners. It’s not a matter of if setbacks will occur, but rather how well-prepared you are to weather them when they do.
3. Reinvest Profits into the Business
Celebrate your small business’s growth and increased profits, but remain focused on long-term objectives. Reinvest capital back into the company to sustain its growth trajectory. Acknowledge achievements by rewarding yourself and your team, but avoid excessive spending. Instead, consider hiring additional staff, investing in marketing, or exploring new technologies to maintain momentum and ensure business success.
4. Prioritize Personal Finances
While running a business demands dedication, it’s crucial not to neglect personal finances. Unlike employees who may have access to retirement plans, entrepreneurs must plan for their own retirement. Despite this, only a small percentage of self-employed individuals and small business owners are actively saving for retirement. It’s vital to allocate resources towards retirement savings and personal emergency funds alongside business investments to secure your financial future.
5. Seek Professional Guidance
Despite achieving success, many entrepreneurs lack confidence in their financial knowledge. Partnering with institutions like Citizens Bank, specializing in small business banking, can provide valuable expertise and support. As an entrepreneur, your expertise lies in your business niche, while financial institutions can offer guidance to translate your hard work into sustainable success.
As a business owner, you dedicate significant effort to your enterprise, and Citizens Bank is committed to supporting your endeavors. With our commercial lenders boasting over a century of collective experience, we offer a range of services from loans to business mortgages and lines of credit, tailored to fuel your passion. Partner with us today and enjoy the peace of mind knowing you have expert support on your side.
