There has never been more resources or hurdles for small business owners. We asked Anita Campbell, founder and CEO of Small Business Trends LLC (SmallBizTrends.com), about the help available for entrepreneurs and what it takes to grow a successful business.
Founder and CEO, Small Business Trends LLC (SmallBizTrends.com)
What challenges do you see entrepreneurs facing today when it comes to maintaining or achieving financial stability?
The biggest challenge I see 99 percent of the time is sales. Entrepreneurs may do great at spending wisely or substituting their do-it-yourself time in place of spending, but fall short of bringing revenue in the door. I heard a Silicon Valley investor once say that every startup entrepreneur should create their financial projections, then take those projections, divide the revenue in half, and double the expense projections. That’s because it will take longer to generate consistent, reliable revenue than most entrepreneurs expect.
So what’s the answer? Have enough of a savings or funding cushion to give yourself time to grow your business. You need at least six months of living expenses, plus enough to cover your basic business expenses until the revenue becomes reliable. Think of it like a 777 jumbo jet: You need enough runway to get off the ground.
For small businesses beyond the startup stage, it’s equally important to establish a “retained earnings” type of fund. This could be as simple as setting up a business savings account and adding a small amount each month to grow into a larger fund over time. This fund can help you weather a bad sales month or recover from a disaster situation.
It’s also important for you as the owner to not strangle your growth by loading up all your time with a lot of administrative and other work. It’s great to save money where you can, but it’s just as important to leave enough open time to network and prospect for sales.
What advice would you give to small business owners looking to grow their companies in the coming year?
This is a terrific time to grow; I am seeing a lot of pent-up demand post-COVID. The economy is opening up and people are spending. That also includes companies who sell B2B. Decision-makers held back and many projects were put on hold in 2020. Now people are ready to buy again.
Take advantage of that pent-up demand — kick your marketing into high gear. For example, small businesses could send out emails to past customers indicating their business has opened up and is operating at full capacity. Or do a postcard mailer, perhaps even a local TV ad. Also, check your Google My Business listing and other local listings to make sure they are up to date, and mention that you have returned to full hours of operation or that the phones are manned, and so on.
Some small businesses went out of business or curtailed operations. In the absence of information, who knows what assumptions past customers may make? You want the world to know you’re open, and do it with a bang!
How have you seen small businesses embrace cloud technology to more effectively improve their financial stability in the past year?
We’ve seen a revolution in how companies view their workplace; it’s no longer just an office, it’s any place their people can connect from.
Some businesses were not ready for the pandemic’s impact and had to scramble to continue operations. They had to figure out how to serve customers when their people were working from home. They also had to find ways to make sales during a time when prospective customers were not able or willing to visit a physical location.
The most successful small businesses embraced expanded delivery of products, online selling, and remote customer service. Cloud technology — such as video conferencing, virtual phone systems, and ecommerce applications — was their savior. Some businesses, such as gyms and personal trainers, totally changed their business models in order to serve customers in their homes via video conferencing, for example.
We’ve seen small businesses innovating and adopting new ways of operating that may actually have saved them money. They’ve found new revenue streams and cut back on facility expenses. It goes to show that if you look for the silver lining, you just might find it.
What are some important steps for small business owners to keep in mind when investing in accounting or bookkeeping software?
Keeping accurate and timely records is critical to profitability. A sad pattern I’ve seen many times is the business owner who keeps his or her own books, but falls behind. Expenses are not entered in a timely manner, then the business owner tries to catch up with months’ worth of expenses in March before the April 15 tax deadline. But in so doing, they miss out on important tax deductions and expense-management opportunities. The owner simply isn’t able to manage expenses intelligently — the data just isn’t in a usable form. It’s hidden in credit card statements, individual invoices, and other forms.
It’s actually easy to avoid being in that situation. When choosing accounting software, look for three features:
- Ease of use: You shouldn’t need to be a CPA or have to understand advanced accounting principles in order to enter information and generate reports.
- Ability to integrate with electronic records from your bank account, credit cards, and other places: You want to avoid manual data entry to whatever extent is possible. Being able to download account data and have it automatically populate your accounting records saves many hours of time. Some accounting software is so smart it can even categorize the expenses into typical buckets such as rent, travel expenses, and other categories, saving even more time.
- Accessibility by your tax preparer or outside bookkeeper: While the business owner needs to keep close tabs on the financial records and generate reports like profit and loss statements, and cash budget on a regular basis, it also pays to get professional help, such as for filing your tax return. Therefore, you want your tax or other outside professional to be able to log in to your records or at least get an electronic file. It will make your life so much easier!