Suppose your small business earned $500,000 in revenue this year, compared to $300,000 last year. That’s great news, right?
Not necessarily. A business that does $300,000 in sales may profit handsomely, say, to the tune of $200,000, whereas a $500,000 business can break even, or even worse, be in the red.
How can a business that’s doing brisk sales be in the red?
Oftentimes, it’s because of cash flow management problems.
Prepare for contingencies
For a small business owner, fixing a leaky roof or upgrading old plumbing can wipe out at least a couple month’s worth of net revenue. That’s why it’s imperative all businesses have cash reserves on hand for unforseen circumstances.
Find rock-bottom prices for goods and services
Let’s say you’re planning on opening a new restaurant. You’re going to have to buy a point of sale system that you can afford and won’t have to change for years to come. You’ll also have to buy all the utensils and equipment necessary to run a commercial kitchen. When it comes time to invest in all the necessary goods, are you spending countless hours finding the absolute lowest price for suitable inventory? Your passion may lie in creating memorable, delectable dishes, but if you’re running a business, you must be somewhat of a penny-pinching accountant.
Perhaps you can find said equipment from a restaurant that’s closing down, or from an auction, rather than buying brand-new equipment. Even if a group of investors are bankrolling your operation, you never know what can happen. Investors can back out or go broke themselves. Thus, save money wherever and whenever you can on equipment, even if it doesn’t seem necessary to do so in the short term.
As for services, such as employee uniform washing, window washing, janitorial services, etc, don’t be afraid to call other businesses that are in the same line of business you’re in. Ask what they pay for these services and others to make sure you’re not being overcharged.
Preventing Chargebacks & Monitoring Reputation
Having a high rate of credit card chargebacks hurts your bottom line. To prevent a large number of chargebacks, make sure your employee training is thorough. Ensure that your employees are consistent in their handling of customer needs. Play an active part in hiring employees to ensure that your business is being represented by highly-competent workers. Monitor your business reputation on social media sites and answer or respond to negative feedback promptly.
Furthermore, there are simple tips that may reduce the number of attempted chargebacks. For instance, if your business name is the LLC name and not the, say, name of the taco truck you own, a customer may not recognize the charge and attempt a chargeback.
Don’t Borrow Money Needlessly
Does your restaurant really need 20 large flat screen TV’s? Maybe if you’re a sports bar it helps, but if you need to borrow money to spruce up your place of business, ask yourself if it’s really necessary. If you do end up borrowing money, expect that you may need to raise prices, which could lead to a loss of some business.
Learn When Business Is Best
Some small businesses owners know their stores enjoys the largest revenues during the holidays. However, for the rest of the year, you should know when sales are at their most brisk. You may be surprised to learn that normal after-work hours are less of a revenue generator than, say, late morning hours. Having a best-in-class POS (point of sale) system will offer you insightful business analytics. You can then take advantage of business reports by offering special promotions during peak hours (or try to offer great deals during weak purchasing times only).
Interested in learning more about what a POS system can do for your business? Contact us today!