As year two of abnormally high inflation presses on, small businesses must continue to face and navigate financial scrutiny. Scott Crockett, Everest Business Funding CEO, has more than 20 years of experience as a professional in consumer and commercial finance. His experience as a serial entrepreneur who has raised over $250 million in capital and provided thousands of employees with job opportunities did not come without overcoming a few financial hurdles.
Crockett shares his insights below on maximizing profitability, budgeting, and managing cash flow to better aid small business owners in navigating financial challenges and overcoming tough economic and market realities.
When financial times are testing, more money coming into a business rather than going out is always going to help. By going lean and cutting costs wherever possible without products or services’ quality suffering, a business can boost profitability by having the ability to level down expenses. Calculating profitability on any future projects will also aid in gauging how much business expenses should be cut, when, and for how long. Three metrics should be analyzed when predicting project profitability, including net present value, internal rate of return, and payback period.
A lack of budget equals trouble and easily stacked debt for small business owners. Budgets should not be a one-and-done deal but rather a living document that is regularly evaluated and updated to present situations. Business owners who consistently maintain a budget will end up making wiser financial business decisions rather than blind ones.
The basic budget should host five key variables: fixed costs, variable costs, one-time costs, a cash-flow statement, and profits. Though many of today’s entrepreneurs are taking advantage of a flexible budget, there is also the option to utilize a static budget. The difference between the two can be found in the terminology. A static budget remains the same regardless of notable changes from planning supposition, while a flexible budget does adjust to such anticipated changes during planning.
Managing Cash Flow
Less than two months of cash is the average amount of cash on hand that a small business has, many often juggling smaller amounts. Being generally strapped for cash can be stressful, especially when the economy takes a dip. Managing cash flow is a survival and development piece to any small business puzzle, which is why pre-predicting how to address any kinks in the flow hose is a must. Disruptions of smooth cash flow can include hindrances in customer payments, seasonal changes in business, or unanticipated expenses.
Small business owners can proactively navigate such cash flow delays by establishing financial strategies ahead of these potential issues. For example, incentives such as a free gift, discount, or reward points for a loyalty program can be offered to consumers who pay invoices early. Committing to forecasting seasonal operations can, over time, better level fluctuating seasonal times. Having a cash reserve strictly for emergencies can soften the blow when surprise business expenses arise. A savings amount can also be added to a business’ budget to prepare for emergency spending. All these precautionary steps and more can be taken to elongate the life of a small business.
About Scott Crockett
Scott Crockett is the founder and CEO of Everest Business Funding. He is a seasoned professional with 20 years of experience in the finance industry. Mr. Crockett’s track record includes raising more than $250 million in capital and creating thousands of jobs. Scott has founded, built, and managed several finance companies in the consumer and commercial finance sectors.
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