Many small businesses fail—and some business failures can be attributed to cash-flow problems—so how can you set up your business for financial success?
There really isn’t just one right answer, but our financial experts have some ideas for you and your business. If you aren’t doing these things as you’re preparing to start your business, consider starting on one today. If you aren’t sure which is most appropriate for your business, financial situation or funding needs, consider talking to a financial advisor, accountant, your lender or all of them.
One of the great things about Utah is the amazing business community, made up of our friends and neighbors. We have a vested interest in the success of those businesses, and these are some ideas to consider to help you make that happen:
Rick Anderson, President/COO, People’s Intermountain Bank
“Make sure you have someone who understands accounting and financial statements and can help you prepare and maintain a balance sheet and profit-and-loss statements. Many small-business men and women have expertise in their industry, but are underprepared for the accounting and bookkeeping part of running and managing a small business. Surround yourself with experts, and then follow the counsel of your expert accountant.”
Dale M. Buxton, President, Lewiston State Bank
“Make sure you have a strong business plan that answers questions like, ‘Do we have a strong market demand for the product or service offered? Is there room in the market for my business? How will downturns in the economy affect profitability?’
Then, make sure you have a conservative and realistic budget. This should guide most business decisions.”
Christopher Liechty, Vice President of Marketing, People’s Intermountain Bank
Use your industry NAICS code from the top of your business tax filing to look up what healthy ratios look like for your industry. Then set these ratios as your benchmark to know if your business is up to industry health standards.
Ask your accountant to help you understand the benchmarks or your lender to help you understand why the benchmarks matter when you need financing.
Some businesses fail because they run out of cash. Paying attention to the financial side of your business from the start will help you to understand where your business is now and along the way—Is it growing? Is it barely surviving? Is it thriving?
If you’re not sure where to start, go back to Rick Anderson’s first idea: “Make sure you have someone who understands accounting and financial statements.”