Small Business Week falls in mid October, so this month I thought I might take some time to share some of the common advice I share with small business owners. Whether you’re self employed, or running a business that employs others, there’s some pitfalls it’s always best to avoid. Entrepreneurship is both incredibly rewarding, and stressful at times, but there’s some planning ahead that can take away some of that stress.
Having a Plan
There’s a difference between having a ‘Business Plan’ and business planning, though you may find yourself building a business plan early on in your entrepreneurship because you’re looking for financing or capital, planning isn’t always a regular activity. Taking time to review your business, find opportunities, dig into what is working, and what isn’t working, is an incredibly important part of continual success for your business.
This doesn’t need to be an exhausting process, but finding a rhythm where you set aside some dedicated planning and review time will give you time to think critically about how your business functions. There’s very rarely enough time for everything on your plate, which makes this time all the more important. Even a few hours every month or two can make a difference in spotting trouble before it arrives or seeing a less obvious opportunity.
When your business makes money, you will owe taxes on it. If you’ve incorporated your business your taxes will function differently, but they will still happen. Planning ahead for the taxes you’ll owe and saving that money aside will help you come tax season. One of the biggest mistakes I’ve seen newer business owners make is neglecting taxes and spending the cash. Managing your HST, as well as your income taxes is incredibly important. Trying to make back a year’s worth of taxes can hamper your business for years. As making payments on that tax bill will impede your cashflow while you’re paying it back. It’s not a fun situation to be in, so making sure you’ve got a handle on things as your business grows is incredibly important.
Regular bookkeeping and financial review will help you see where your business’ profitability stands. This can give you a rough idea of your income tax bill. Even if you’re paying instalments through the year, having an accurate idea of what your taxes will be, not what they’ve been estimated to be will also help you avoid fees and penalties.
Finding the Flow in Cashflow
A profitable business can have no money, which is a weird concept if you’re not familiar with it. If your business has receivables to collect, then there is a delay between when you complete the work versus when cash comes in. On the flip side, for a retail business when you purchase product is not when it sells, managing the cashflow around inventory is also a big concern. Learning when to transact expenses, can be helpful, but either making sure you have some credit available, or a large enough cash reserve is critical. You can have all the accounts receivable on the books that you want, but if you can’t make payroll you’re going to have a big problem. Understanding your business cycle through the year can also help you prep for the cyclicality in your industry and prepare accordingly.
Prioritizing Your Wellbeing
Many business owners burn themselves out. There’s a lost of stress, and risk for a new business, and those feelings never really go away. Taking care of yourself is important for the long-term success of your business. Long term planning is difficult when you can’t see past tomorrow. Recognizing when you need help, being comfortable with delegation, and taking time to relax and recharge are far more valuable than making sure everything is done perfectly to your specifications. There will always be room for improvement, and there will always be demands on your time. It’s up to you to find that balance between action and rest. At the same time, it’s also important to recognize when your heart’s not in it anymore. Having a succession plan before you’re done will make sure what you’ve built continues on, and rewards you for what you’ve put in.
Protecting From the Unlikely
Death, disability, and illness all happen. ‘I never thought it would happen to me’ doesn’t work out well for anyone once the tragedy has unfolded. Having a plan to replace yourself should you be unable to work for a time, or indefinitely can help make sure that you and your family are taken care of, as well as the business you’ve built and the staff that rely on it for their livelihood. Take the time to think through what would happen if you weren’t a part of your business, if you don’t think it would end well. I’d say you need to spend some time on that.
Entrepreneurship is a rewarding experience, but it’s a difficult one. There’s a lot of good that comes out of small businesses, and I’m happy to have the opportunity to recognize all of the effort and sacrifice that makes small businesses run!
Until next month, celebrate your wins!
Laura Whiteland is a CERTIFIED FINANCIAL PLANNER® and Chartered Investment Manager® Professional, she is the owner of Inclusive Financial Planning, a fee-only financial planner. You can check out some of her other blogs on our page here.
This article is intended as general financial information and should not be construed as personalized financial advice.