Every new business has startup and operational costs, and it’s easy to incur debt during the early days of launching your venture. Carrying debt over the long term, however, has the potential to be hazardous to the health of your business as it may impact your ability to get financing or take advantage of new opportunities as they come your way. Fortunately, there are a number of ways to get back into good financial business standing. According to the U.S. Small Business Administration, a business and marketing plan is a good first step. If your marketing needs a bit of a bump, a custom print and design company like Tower Press is a good place to start.
Evaluate Your Finances
Make an assessment of your debt load and create a budget for your business, just like you would your household. While it may be tricky to try and estimate business and personal income, base your projections on the low end of the scale so that the budget you create will work even in the lowest of revenue streams. Cover every expenditure, from inventory purchases to overhead, salaries for employees or freelancers, and operational expenses. When you estimate expenses, estimate high. Depending on how long you’ve been in business, you may be able to look back and estimate an average monthly debt-to-income figure.
Start Slashing Expenses
Eliminate any non-essential expenses, but be careful about what you put in the “non-essential” category. For example, many people mistakenly think advertising and marketing costs can be cut since they aren’t as essential as something like a mortgage. While this is true, marketing is how you bring in revenue. Instead, cut things like over-the-top entertainment expenditures and non-urgent equipment buys. Also, look for ways to downsize but not eliminate, other expenses. For example, lease a less expensive company car and forego upgrading your phone every time a new model debuts. The small things can add up when you’re making a big budget overhaul.
Pay Down Debt Methodically
Depending on how your debt is structured, there are a few ways to tackle it. One popular approach is to look at where you’re getting charged the highest interest rate and make that repayment your priority. It’s also advisable to focus on one debt in earnest while you pay the minimum on others, and then compound your payment to tackle the next one on your list. You might also look at a business debt consolidation loan or line of credit that offers better terms. Some creditors will also agree to lower your interest rate if you’ve been a reliably paying customer. Whatever you do, don’t allow yourself to fall behind on payments. That can lead to fees, penalties, higher interest rates, and possibly even damage to your credit score.
Revisit Your Business Structure
If you aren’t already registered as a limited liability company (LLC), now’s the time to consider it. This move can both protect you from some types of business liability, while also giving you better tax benefits, which ultimately helps you save money. Different states have different rules around LLC formation, so check them out in advance. You can do the legwork yourself, or use a formation services company. Both options save you money over hiring an attorney to do the paperwork on your behalf.
Business debt is often part of the normal course of small business ownership, but staying financially solvent and relatively debt-free should be the goal. A business that’s in good financial health can better weather storms that come with unexpected dips in the economy. According to Salesforce, it’s also wise to keep your marketing and advertising strategy operational to ensure you’re not only paying down debt but increasing revenue by way of attracting new business. For insights into how custom marketing solutions can help you build your customer base, visit Tower Press or reach out via email for more information.