How Women Entrepreneurs May Boost Their Small Business Plans in 2019
According to WBENC, there are 12.3 million women-owned businesses in the United States, which is a significant increase compared to only 402,000 that was reported in 1972. With women entrepreneurs owning four of every 10 businesses in the United States, they certainly are not strangers to some of the major challenges that are faced with running a business. Like all other business owners, women-owned businesses must also find ways to ensure their small business plans unfold as profitably as possible. Most of the time this requires an adequate amount of business funding to sustain them during the slower months; when sales are low.
Below is some information on what women entrepreneurs should consider doing to ensure their business plan is executed and sustained during every stage of their business.
Deciding on Profitable Business Ideas
Like all business owners, women entrepreneurs must also put a lot of thought into selecting the right business idea. Choosing the right business model and having the right product and service can have a great impact on whether or not the business is profitable. Many people go into business as a result of various things they enjoy doing. However, it may or may not be profitable. In other words, there may or may not be a great demand for the business idea. Thankfully this can be determined beforehand by performing the necessary marketing research about the trends and sales statistics that are taking place in your proposed industry.
Nonetheless, it’s important that you apply for a Small Business Loan long before it is needed to avoid cash shortages and pitfalls.
How to Identify Potential Cash Pitfalls Before they Occur
One of the best ways to identify potential cash pitfalls before they occur is to develop a cash management system that can be monitored regularly. This can be done by referring to your statement of cash flows and identifying the months that have higher sales performances than others. In doing so, you can better project when the slower months will roll around again. To that end, it’s also important to monitor your historical financial information so that you can identify any trends that would result in your business experiencing any cash shortages.
There are times when there are certain activities that take place that creates an increase in sales. For example, if you own a local restaurant near a high school, you may see an increase in sales during the normal school months, but a decrease in sales during the months that the school is closed. This information will likely be reflected in your statement of cash flow’s and can help you to make better financial decisions in terms of making sure your business is adequately funded during the slower periods.
Monitoring Accounts Receivables
If you run a different type of business that requires you to extend credit terms to your customers, that can often have a significant impact on your cash flows as well. It’s also important that you monitor your accounts receivables and efficiently qualify clients before allowing them to receive terms with your company. For example, clients that have low personal and business credit scores also referred to as Paydex Scores are likely poor candidates to offer credit terms. Doing so will result in many cash flow issues.
One way to tie up your cash is by extending credit terms, which is more apparent when you offer products as opposed to services. If you sell products from a brick and mortar location, in most cases you will be responsible for purchasing the product and shipping it off to your customer before the payment is received. If you purchase a product in let’s say August and extend credit for 60 days, that means:
- You’ve likely spent money to purchase the product upfront, and…
- According to the terms, the payment is not expected until October
- You offer credit terms to multiple customers without considering the impact it has on your cash flows
- If you purchased your items on credit, you may not consider the difference in the interest that you are paying to your creditor, versus what you’re collecting from your customer.
- If on the accrual system, you still owe quarterly estimated taxes on the money you haven’t received yet.
So even though your company may be generating sales, it may not be collecting cash. It is often during those times that other funding alternatives be put in place to keep the business afloat. A grant is a great alternative. But often a small business loan will be very beneficial as you are waiting to collect money from your customers.
Monitoring Bad Debts
If you have too many customers who are on credit terms that struggle to pay you, eventually those accounts will need to be written off as a bad debt.
Although this a tax advantage for business owners, it also has a great impact on your cash flows. As a result, to carry out and sustain your business plan, it’s important to be a step ahead of the game and not only develop a cash management system, but also have access to various funding sources before they are needed.
In addition to the above, it’s also important to make sure you can repay the loan when it’s due.
Lastly, when obtaining a business loan for women entrepreneurs, be sure to be prepared to begin making payments in as little as 30 days in most cases. This is true whether your business is generating revenue or not. It’s also extremely important to establish a great relationship with banks, credit unions, and other funding institutions so they can become familiar with your business’ financing needs and offer needed solutions accordingly.