Someone recently sent me a question asking about tips for managing finances for small business owners looking to expand. Small business owners looking to expand face the same fundamental finance problem any other business faces – how to invest in your business while making sure you have enough cash to pay your bills.
You might think that sounds obvious, but if it was so straightforward we wouldn’t have 50% of businesses failing by year 4. Businesses fail for one reason – they run out of money. Unfortunately, running out of money is a symptom of many possible problems and doesn’t necessarily indicate mismanagement of finances.
To help you get the most bang for your buck, consider the following strategies for managing finances for small business (and big business too!):
1. Pre-sell your product like a mad person
Anyone who knows me and my routine knows I spend an ungodly amount of time in transit, to the tune of 40 miles each way. When I’m not on the phone trying to catch up with folks, I enjoy throwing on a good podcast, especially on my morning drive. Entrepreneur on Fire (EOF) is one that I particularly like because of the range of small business experiences where you get to hear the behind the scenes bumps and bruises that led to success.
EOF is where I learned that selling something before you create it make a lot more sense than you fronting the money or time for a product you don’t even know people want to buy. More importantly, several entrepreneurs share stories proving customers aren’t opposed to the idea of pre-selling when packaged correctly. You may want to offer some incentive for the early adopters, like introductory pricing, which I’ve seen done as well, but you can almost always pre-sell when there’s a product involved.
You ever watch the Home Shopping Network and wonder why it takes 6-8 weeks from the time of order to the day the product reaches you? USPS has some problems, but you can’t pin this delay on them. Sellers are waiting to hit a critical mass of pre-sales before beginning any production of significant inventory.
2. Seeing is believing, so invest in samples
You know what gets people buying products like crazy? If you answered discounts, that’s a legit answer, but not the one I’m looking for. Take a look at nearly any service out there you would consider using. I bet 9 out of 10 times, that service offers a free trial period. They give you a sample because they know their product is so good that once you’ve had it, you won’t want to go back to life without it.
Canva, which already offers a GREAT free product – that I use to create the non-cartoon images on this site – is doing this now with their new paid product, “Canva for Work” (can’t wait for my free trial!).
In case you didn’t see it recently, I also offer a free sample and a money-back guarantee on my book.
You even see this “freemium” model in play in education.
This is the new way of doing business, so if you’re not letting your customers test your wares before buying, you’re probably not expanding as quickly as you could. And you’re probably losing out on profits too. This article gets into the details of why pre-selling is important.
3. Expand your customers before expanding your team and office space
Few things pain as much as hearing about some small startup trying to get office space on the Magnificent Mile in Chicago or right in the middle of the financial district in San Francisco. A lot of businesses seem to be trying to fake it until they make it. If you subscribe to this strategy, you probably commit yourself to a lot of overhead in the form of rent and salaries of staff doing work you could probably manage to do yourself. The only thing you’re expanding there is the number of checks you have to write every month.
4. Go easy on the website (at first)
Another place people get burned is their website. You don’t have to put $10K into your website when you’re a growing business. You have so many options available to you to create a professional looking site without spending boat-load of cash.
For Never Less Than Success, I spent about $100 to get the current WordPress theme (affiliate link) up and running. For a while, I had a free theme that worked well but relying on forums for support with modifying code gets old eventually.
I spent about $130 to add in some e-commerce functionality from iThemes.
Leadpages, which I referenced above, cuts down on developer costs for creating landing pages, and costs $297 for 12 months. I don’t think you can get a single page done if you hire a developer to build something custom.
I’m not saying you shouldn’t aspire to custom designs, but you have to make sure you know how to prioritize. I know as well as anyone there’s always tinkering to be done and changes to be made but doing so at the cost of growing your profit isn’t good business sense.
When thinking about finances for small business, keep your eye on the prize
Next time you’re getting ready to cut a check, ask yourself how it will benefit your business in the next 30 days. It may change your decision for the better.