If your business is in debt, don’t worry — you’re not alone. At least 70% of small businesses are in debt, according to a research study by Zippia. With a few smart moves, you can get your business out of debt and on the road to financial health. Here are some tips from 1st & Main Investment Advisors to get you started:
Create a Budget
The first step to getting your business out of the red is to create a budget. A budget is a roadmap that tells you where your money is going and helps you find areas to cut costs. To create a budget, track your income and expenses for a month or two to get your spending baseline. Then, develop spending categories and set limits for each one.
Once you know the financial landscape of your business, it’s time to minimize spending. Look for areas where you can cut costs without sacrificing quality or service. For example, if you’re spending a lot on certain utilities or a vendor, look for a more cost-effective option. You can also save money by negotiating better terms with your suppliers or landlords. If you’re not sure where to start, talk to a financial advisor or accountant who can help you find areas to reduce expenses.
You should also take advantage of free resources whenever possible. For instance, a free invoice template will save time and money, while also making it easier to maintain precise, professional records.
Besides lowering expenses, you also need to inject cash into the business. Here are a few ideas:
- Offer new products or services. Adding additional revenue streams can help offset some of your existing debt.
- Raise prices on existing products or services. By increasing your prices, you can bring in more revenue without finding new customers.
- Review your invoicing process. Invoice and collect payments promptly. Online invoicing apps, such as FreshBooks or Zoho Invoicing, can automate the process and help you get paid faster.
Lowering your taxes could also help increase your revenue. Talk to a tax advisor about reducing your tax bill. If you’re registered as a limited liability company (LLC), you can take advantage of certain tax deductions.
Next, if your business has multiple debts, merge them into one loan. This tactic can save you money in the long run by reducing the amount of interest you’re paying. When consolidating debt, look for a loan with a lower interest rate and a repayment period that fits your budget. You can also talk to your creditors about lowering the interest rate on your existing loans.
Improve Your Business Skills
Finally, one of the best ways to boost your business’s financial health is to invest in yourself. Learning new business skills can help you run your business more efficiently and make better decisions about spending and investing. You can find plenty of resources online or consider taking a course or attending a seminar. Improving your financial literacy will pay off in the long run by helping you make smarter decisions about your business’s money.
Out of the Red
When it comes to getting your business out of debt, the most important thing is to take action. By following these tips, you can get your business on the road to financial health. Remember, if you need help, there are plenty of professionals who can assist you in getting your business back on track.