Source: Succeed As Your Own Boss, 7/26/16
It’s not easy running a small business with limited capital. If you are just starting out a new business venture, the challenges are even greater. Limited capital is the single biggest factor in determining how much you can, and cannot do to meet the needs of your customers. Having limited funds does not need to be the death nail of your business, if you know how to manage it well. Keep in mind that big businesses on a corporate scale were not the norm before the Industrial Revolution. Hundreds of millions of people throughout history have started and maintained their own small businesses without access to an unending supply of cash. Here are some tips and tricks to survive in a small business with limited capital.
- Maintain Strict Receivables Policies
One of the biggest cash flow headaches small businesses face is keeping receivables flowing in. It is a mistake for any business with limited capital to assume they must offer 15-, 30- or 45-day terms. Do not set payment terms based on what everyone else is doing. Don’t set them according to what you think your customers want. Your cash situation should determine your payment terms. Let your products and services sell your company, not generous payment terms.
- Stick with Your Core Business
How many times have you read stories in the business section of the newspaper detailing a large corporation’s desire to sell assets in order to return to their core business? It happens all the time. Big businesses attempt to expand and grow through acquisition only to discover that it does not usually work well. And if it doesn’t work well for them, it is not going to work well for you either. Stick with your core business. Grow it by being better than your competitors and adding new customers. You will spend less cash trying to develop new products or services that will only require more resources to maintain.
- Talk about Your Business – A Lot
The best form of marketing has always been word-of-mouth. The company with limited financial resources is in the best position to take advantage of this marketing by starting the conversation. You can do it in-person or online through social media. As a business owner, be sure to tell everyone you know about what you do. Pass out as many business cards as you can get your hands on; start conversations on social media; run contests and reward programs that encourage your customers to tell others about your business. The more you speak positively about your business, the greater your reach – even if your marketing budget is limited.
- Keep the Office Lean
You need to present a successful image in every area of your business that is customer-facing. However, that is not the case in the back office. Work out of your home, if you can. Companies with limited financial resources would do well to keep the office as lean as possible so that valuable capital can be invested where it is most needed to enhance the customer experience. For example, do not spend tens of thousands on new office furniture when you could get by with used furniture at a fraction of the price. A brand-new, state-of-the-art computer system might be nice, but is it absolutely necessary to make things work.
- Keep Your Staff Minimal
Appointing human capital to get the work done doesn’t always require hiring actual staff. If you ask me, hiring full-time staff for all your small business activities is overrated and costs you a whole lot of money. Outsource the things you can’t do yourself and pay the freelancers just for the projects you actually need. This would save the extra costs that incur on hiring full-time staff such as employee payroll, health-care costs, tax-costs, other legal mandatory benefits, etc.
Running a small business with limited capital is a challenge, but not impossible. It does require a combination of creativity and willingness to think outside the established norms. If you are prepared to do so, you can be successful in building a business that eventually has more than enough capital to function the way you want it to.
If you are looking for more capital, find out more about our small business loan program!
