By: Devin Morrissey
Starting up a small business can be rough. Even if you possess near-infinite entrepreneurial spirit, chances are that you’ll run into some roadblocks along the way. Whether these obstacles are based in logistics of strategy and implementation of your business model, or even issues with the very products and services you offer, most of these problems can be solved with financial influx.
Unfortunately, finding the capital to fund your business isn’t the easiest thing in the world. While there are business loans and investors who might be interested in backing your business, the fact is these sources of money are finite. Even if your business is at a point where it makes enough revenue to support itself, even a slight misstep can lead to financial disaster. However, taking an innovative approach can often prevent or reverse a business’s financial woes.
Learn From Mistakes
First, the best lesson a business can learn is not to be afraid of failure. Though it may seem counterintuitive, failure is actually necessary for success. Assuming that your business is immune to failure or fearing failure can actually hinder your progress as a company. Think of your business like an athlete — failure exposes weaknesses and places that can be improved upon that will help a business rebound from obstacles in the future.
For example, LegalZoom, a company that connects businesses and individuals with lawyers, had to abort their initial public offering that valued the company at around $400 million dollars. The IPO was shelved and a private equity firm saved them with a large investment in 2014. Instead of being disheartened by their first failed IPO, LegalZoom bounced back at a valuation of $2 billion dollars, raising $500 million dollars in the most recent round of funding.
Stories like this are not uncommon. Many major companies have gone bankrupt only to come back even stronger than before. Apple, Best Buy, American Apparel, Kodak, and Jack in the Box are all examples of companies who suffered through financial difficulties then had massive resurgences, establishing themselves as household names and ensuring success.
Understand Revenue Streams
It is of course important that any business has positive cash flow in order to function properly. Cash flow is the fuel for small business growth, and planning ahead with a cash flow projection can help to fend off any unplanned expenses by showing a company how much they have, and how much they expect to have down the line. It is important to monitor your cash flow daily, and identify and track your payables and receivables as far as two months out to avoid any nasty surprises. It is also a good idea to keep a decent amount of cash in reserve just in case there are any major expenses that pop-up with no prior warning, which will help to ensure that a business will remain productive.
Adapting to a changing marketplace is also necessary for a thriving business. Direct-to-consumer products are disrupting the established marketplace by cutting out the middle man, saving both the business and customer money. Dollar Shave Club, Warby Parker and Quip have all carved out a space for themselves in their respective and highly competitive fields where there didn’t seem to be any room left. Keeping your mind open in regards to new distribution methods is just one innovative way to shake things up.
The use of automation and AI can also help improve your bottom line. Automation can free up employees’ schedules by handling the bulk of customer service issues, allowing them to focus their time elsewhere within the company. AI can help a business to make better financial decisions by predicting market trends through organization, classification, and recognition of patterns that may not be readily apparent to a human. AI can also help with the recruitment and hiring process by screening and researching prospective candidates, improving retention and cutting the time it takes to find the candidate that will require the least amount of training for the job.
Streamline Using New Technology
Technology has always been a massive boon to businesses, and as new technologies are developed, businesses that quickly adapt to them tend to thrive over those that don’t. For instance, the Internet of Things permeates life all around us. Our smartwatches talk to our phones, which talk to our computers, which tell us about our health, et cetera. However, the IoT is not limited to the banal individual tasks of everyday life. In a workplace environment, if the IoT is implemented and functions well, businesses are given an edge through mass data collection and analysis. It helps businesses to spot weak points, identify efficiencies, and ultimately streamlines the business quickly and effectively.
Other ways to make your company more efficient include capitalizing on automation wherever possible, addressing the bottlenecks and inefficiencies identified by the IoT, and minimizing travel time as much as possible. Making every effort to embrace digital documentation in lieu of hard copy documentation will improve the functionality of your business by making documents easier to find and reducing the cost of storage and maintenance for your data. This will also make sharing information between employees much easier, making sure that everyone is on the same page.
It is also possible to reduce costs by adopting a lean supply chain management philosophy. The idea behind this is to eliminate as much waste as possible. This waste isn’t just physical, but relates to logistics and is found in the form of defects, overproduction, wait times, under utilization of talent, transportation, inventory, motion, and extra-processing. By cutting out waste in these areas you not only save money, but maximize efficiency and productivity, giving a business twice the return on investment by saving money on both sides of the coin.
By Devin Morrissey
About the author
Devin prides himself on being a jack of all trades; his career trajectory is more a zig zag than an obvious trend, just the way he likes it. He pops up across the Pacific Northwest, though never in one place for long. You can follow him more reliably on Twitter.
Featured image via Unsplash.