Welcome to the grand finale of our comprehensive blog series on the journey of building a successful small business. In the previous installments, we embarked on a thrilling adventure, starting from the inception of your business idea, navigating the intricate paths of growth with essential marketing tools, and witnessing your entrepreneurial dreams taking shape. If you have not already read them, here are some quick links that will take you to the blogs:
Part 1 Starting a small business – Pre-requisites
Part 2 Prepare your business for launch
Part 3 Growing your small business
Now, as we embark on the fourth and final part of our series, we will delve into three critical pillars that underpin every prosperous small business: financial management, technology, and legal considerations.
While the initial steps of starting and marketing your small business were essential, it’s the meticulous handling of your finances and adherence to legal regulations that will determine your enterprise’s long-term viability and resilience.
In this conclusive chapter, we’ll equip you with the knowledge, strategies, and insights needed to navigate these intricate domains with confidence and finesse.
Let’s get started.
Managing your small business
1. Financial Management
Financial management is a critical aspect of running a small business. As a business owner, it’s important to have a solid understanding of your finances and to manage them effectively to ensure that your business remains profitable and sustainable over time.
Most of the small businesses face some common financial management challenges:
• Creating and managing a budget
Creating and managing a budget is essential for small businesses to achieve financial stability and success. It involves setting financial goals, creating a budget plan, categorizing expenses, setting spending limits, monitoring your budget regularly and creating an emergency fund.
• Cashflow management
Cashflow management refers to the process of tracking and managing the flow of cash in and out of a business. It involves monitoring the amount of cash coming in from sales, investments, and financing, and tracking the amount of cash going out for expenses such as rent, salaries, and inventory.
• Payroll management
Making payroll is the process of paying employees their wages or salaries for their work. It involves calculating the amount each employee is owed, deducting taxes and other withholdings, and processing the payment.
• Staying on top of bills
Staying on top of bills is essential to maintain financial stability and avoiding unnecessary expenses such as late fees, penalties, and interest charges. This also affects your credit score.
• Understanding important KPIs and metrics
Key Performance Indicators (KPIs) and metrics are critical tools for measuring and evaluating the financial health and performance of small businesses. These metrics include revenue growth rate, gross profit margin, net profit margin, cash flow, debt-to-equity ratio, and customer acquisition cost, among others. Below are some quick formulas:
- Gross profit margin = total sales – COGS (or cost of sales) / total sales x 100
- Operating profit margin = operating income / revenue
- Net profit margin = net profit / sales x 100
- Return on assets = net income / average value of assets x 100
- Working capital ratio = current assets / current liabilities
- Working capital turnover = net annual sales / average amount of working capital for the same year
- Operating cash flow ratio = net income + non-cash expenses + changes in working capital / current liabilities
How can you overcome the challenges?
- Create a budget and stick to it: A budget helps you manage your expenses and cash flow. It also helps you prioritize your spending and avoid overspending.
- Monitor your cash flow: Cash flow is the lifeblood of your business. Monitor your cash flow regularly and ensure you have enough cash to cover your expenses.
- Use accounting software: Accounting software can help you automate financial tasks, track expenses, and generate financial reports. It can also help you identify trends and make informed decisions.
- Manage your inventory: Managing inventory can be a challenge for small businesses. Overstocking or understocking can lead to cash flow issues. Use inventory management software to keep track of your inventory levels.
- Get paid on time: Late payments can hurt your cash flow. Establish payment terms and follow up on late payments.
- Seek professional advice: Consider hiring an accountant or financial advisor to help you with financial planning and management.
- Plan for the future: Set financial goals and create a plan to achieve them. Review your financial plan regularly and adjust as needed.
In addition to accounting and billing, small businesses also need to consider their tax obligations. This can include calculating and paying sales tax, payroll taxes, and income taxes. It’s important to stay up to date on tax laws and regulations and to ensure that you’re accurately reporting your income and expenses.
2. Technology Solutions
Technology has become increasingly important for small businesses in today’s digitally driven world. Implementing the right technology can help SMBs increase efficiency, improve customer satisfaction, and ultimately, grow their business.
Technology can streamline business processes, automate tasks, and provide valuable data insights that can help make informed business decisions. Investing in right technology solutions can improve the performance of small and medium-sized businesses (as shown in the pic below):
Source: Microsoft Study
Other benefits of investing in technology include:
- Improved productivity: Technology can help small businesses automate manual processes, which frees up time for employees to focus on more strategic tasks.
- Enhanced customer experience: Technology can help you in providing a seamless and personalized customer experience, which can lead to increased customer satisfaction and loyalty.
- Cost savings: Technology can help you reduce costs by automating tasks, streamlining processes, and reducing the need for manual labour.
- Improved data management: Technology can help you collect, store, and analyze data, which can provide valuable insights into customer behaviour, market trends, and business performance.
- Increased flexibility: Technology can enable your teams to work from anywhere, at any time, which can improve work-life balance and increase flexibility.
What are some of the must-have technology solutions that can help your small business?
a. A CRM Solution
A Customer Relationship Management (CRM) can help you manage your customer interactions and relationships effectively. A CRM system can provide a centralized platform for small businesses to store customer data, track interactions, and even manage marketing campaigns. Other benefits include:
- Ability to personalize customer interactions and offer targeted marketing campaigns
- Ability to identify potential sales opportunities and take action to convert leads into customers
- Ability to automate many business processes like lead generation, sales tracking, and customer service
- Ability to gain valuable data insights for making informed business decisions
Some popular CRM solutions for small businesses include Freshdesk, Zoho CRM, Zendesk Sell, Pipedrive, Insightly, Salesforce, etc.
b. Cybersecurity solution
Small businesses are becoming a target for cyber-attacks. In fact, 51% of small businesses that fall victim to ransomware pay the money. Amongst the most common cyberattacks, Malware was the most common. (Check the below image)
This is because small businesses usually lack the necessary resources and expertise to implement strong cybersecurity measures, increasing their vulnerability to cyber threats. A good cybersecurity solution can protect your sensitive data, help you ensure business continuity, build customer trust, comply with regulations, and help you prevent reputational damage.
Some best cybersecurity and data protection solutions include names like Acronis, Malwarebytes for Business, ESET PROTECT Advanced, Symantec End-User Endpoint Security, Microsoft Defender for Endpoint, etc.
c. Inventory Management solution
Inventory management is highly essential for small businesses as it helps in streamlining operations, optimizing inventory levels, and reducing costs. It can help small businesses achieve these benefits by automating the inventory management processes, providing real-time inventory data, and optimizing inventory levels.
Some popular inventory management solutions include names like Freshbooks, NetSuite, Zoho Inventory, and more.
d. Billing and invoicing software
Billing and invoicing software is extremely important for small businesses. By automating the billing and invoicing process, small businesses can save a lot of time that would otherwise be spent on manually generating invoices, tracking payments, and following up on late payments. This time can be better spent on other important tasks, such as growing the business or serving clients.
Some tools you can consider include RackNap, Zoho Invoice, NetSuite, QuickBooks, and more.
e. Social Media and digital marketing tools
Social media and digital marketing tools are essential for small businesses to reach and engage with potential customers in today’s digital age. These include tools for managing social media like Hootsuite, Sprout Social, and Buffer; for search engine optimization like Google Analytics, SEMrush, and Ahrefs; for content creation like Canva, Adobe Creative Cloud, and PicMonkey; for email marketing like Mailchimp, Campaign Monitor, and Constant Contract.
f. Website Builders
A website builder can be very cost-effective for small businesses. With AI-support website and app builders like Builder.ai, you can create a business website or any web application from scratch without requiring any technical knowledge. The website builders also offer a range of templates and customized options to allow small businesses to create a unique and personalized website that reflects your brand.
Some other examples of website builders include Wix, WordPress, Squarespace, Shopify, Weebly, and more.
Additional Resource: Technology Adoption by SMBs – Why it is imperative for Growth
3. Legal and Compliance Management
Legal and compliance management is an essential aspect of running a small business. This involves ensuring that your business is operating in compliance with all relevant laws and regulations, as well as managing legal risks and liabilities.
One of the first steps in legal and compliance management for small businesses is to identify the relevant laws and regulations that apply to your business. This can include federal, state, and local laws, as well as industry-specific regulations. It’s important to stay up to date on changes to laws and regulations and to ensure that you’re in compliance with all relevant requirements. Following the Small Business Administration website is a good place to start and learn about small business operations.
As a small business, legal requirements can vary based on the industry you are entering, however, some common legal requirements include:
- Choose your company’s business structure (Sole Proprietorship, Partnership, Limited Liability Company, or a Corporation)
- Register your business name (Check for trademark, copyright, etc.)
- Trademark your business logo
- Obtain permits and licenses (based on the nature of your business)
- Determine if you need a state tax ID number
- Open a business bank account
- Research and comply with Labor laws in your industry
- Identify legal risks and have a plan ready if any issue comes up
4. Additional tips for growing your small business
Establish Strategic Partnerships
Establishing strategic partnerships can be an effective way for small businesses to earn more revenue. By partnering with leading vendors, small businesses can gain access to new customers, expand their product or service offerings, and benefit from the marketing and selling expertise of their partners.
As per research, 57% of organizations are using partnerships to acquire new customers. In fact, as per an Accenture report, partner ecosystems can generate $100 trillion over the next ten years.
There can be various modes of establishing partnerships. Small businesses can consider joint marketing and promotional partnerships. This involves partnering with other businesses to promote each other’s products or services through joint marketing campaigns, events, or other promotional activities. Joint marketing and promotional partnerships can be a great way to expand your customer base and reach new audiences.
You can also consider affiliate or reseller partnerships to grow your small business.
When establishing strategic partnerships, it’s important to choose partners that align with your business goals and values. You should also ensure that your partners have a strong reputation and a proven track record of success. It’s important to establish clear expectations and guidelines for the partnership, including how revenue will be shared, how marketing and promotional activities will be managed, and how customer service and support will be handled.
Stay on top of industry trends
Staying on top of industry trends is essential for small businesses to remain competitive and adapt to frequent changes in the market. By staying on top of trends, we mean being up to date on the latest developments, trends, and best practices in the industry.
One way to stay on top of industry trends is to attend events, such as conferences, trade shows, and industry-specific events.
Source: Pexels
These events can provide valuable opportunities to:
- network with other professionals in your industry,
- learn about new technologies and trends, and
- gain insights into best practices and strategies for success.
Another way to stay on top of industry trends is to follow news sources and publications that focus on your industry.
This could include trade publications, online news sites, and blogs. By following these sources, you can stay informed about the latest news, trends, and developments in your industry.
Some sites you can follow for the latest business news include names like CNET, Wire19, Daily Host News (DHN), Bloomberg, Inc.com, Entrepreneur.com and many more.
So, ready to start your own business?
Starting a business is a fun and exciting journey, and we hope that this guide has provided you with the knowledge and tools you need to get started. It’s important to remember that building a successful business requires hard work, dedication, and perseverance.
However, with the abundance of resources available to small business owners today, you have all the support you need to turn your dream into a reality. We encourage you to bookmark this guide and refer back to it often as you navigate the challenges of entrepreneurship. We wish you all the best on your business journey!
If you liked our series of small business guide – you can download a comprehensive resource with all details as a checklist for future reference.
