It’s not uncommon for a business to find itself in debt at one time or another. However, this isn’t an ideal state, so you need to develop a plan to eliminate your debt, calculate and improve your debt-to-income ratio, and increase profitability. Presented below by Investory Spot, here are a few important steps you can take to improve your business’s financial standing.
Create a Budget
Budgets aren’t just for household groceries. Your business needs a budget, so you can stay on top of your expenses and income. Once the budget is created, you can start assessing your variable and fixed costs and determine where to reduce expenditures. You can also see your revenue and identify opportunities for increasing cash flow. Use a program such as Microsoft Excel or QuickBooks to make the budget and even automate certain financial tasks.
Trim the Edges
Reducing your expenses is one of the most important steps to getting out of debt. However, you don’t have to jump right to drastic measures, such as laying off employees or downsizing your space. There are many other little things you can do that add up.
For example, are you paying numerous fees to your financial institution? Contact your bank and see if you can get charges eliminated. Often, banks offer this in exchange for setting up automatic payments or switching to paperless statements.
How’s your inventory situation? If you’re consistently dealing with a surplus, re-strategize your procurement methods, so you’re not needlessly overspending on inventory.
Grow as You Go
While reducing expenditures is great, getting your business out of debt mostly requires increasing your revenue. The easiest approach may be to increase your prices, but you can take other steps to improve your cash flow. Identify new products you can add to your current offerings to meet customer demand. For example, if you sell ice cream, consider adding cookies and other pastries to your lineup. Also, start or expand low-cost market initiatives on popular social media apps, such as TikTok.
Register Your Business
There are four main types of business entities: sole proprietorship, general partnership, limited liability company, and corporation. An LLC confers certain benefits, including tax advantages and flexibility. This business structure also protects you from liability in case of a loss.
LLC formation rules vary by state, so if this is the structure you select, do your research before hiring a professional or using a formation service.
Secure a Grant
Small business grants may be difficult to get, but you can take steps to make your application stand out to increase your chances of success. Verify that your business meets the requirements for the grant you’re seeking. For example, you may need to have a certain number of employees or a particular revenue level. Then, put together an exceptional grant proposal to be competitive against the other candidates.
Get a Fresh Start
Having your business be in debt can be difficult, but it’s certainly not insurmountable. Create a budget, look for areas of opportunity, formalize your company’s business entity, and take advantage of grant programs to help small businesses like yours.
For more great investory content, explore the other articles on Investory Spot.
As a one-on-one financial coach, Ted James has seen and helped it all. He created his site, Ted Knows Money, to share money tips and help people get complete control of their finances.
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