Successful entrepreneurs are usually well aware that every dollar they spend ought to have a clear value and purpose, as well as a good return on investment. While each small business comes with its own specific set of strengths and weaknesses, there are a number of tried-and-true strategies that successful business leaders can adopt across a broad range of industries and business models.
If you'd like to learn how to extend the value of your economic resources, start by following these proven money habits of successful entrepreneurs.
1) Invest in your personnel
The cost of replacing an employee is often substantial. While some level of turnover is unavoidable, you can keep these related costs low by making sure your staff members love their jobs. Investing in building a winning office culture, as well as offering a strong benefits package, continuing education and other worker-focused perks will go a long way toward keeping your team happy.
2) Diversify your revenue streams
Always explore new opportunities rather than resting on your laurels. There's no telling when market conditions will shift and you'll be better positioned to survive a downturn if you can book sales from multiple product lines.
To diversify your existing business is to “future-proof” it against life’s unpredictable ups and downs. Diversification also gives the opportunity for growth. Adding new products or services to your portfolio will allow you to serve more people across different target demographics. This can help you build your company into a more well-rounded - and profitable - enterprise.
There are many ways to diversify. You can begin by making predictions about the next few years. Consider asking your customers for suggestions and for their current opinions about your company. How can you sell a new service alongside one of your products? Can you sell a product related to something you already offer? Branch out and find ways to use the talents you already possess to create new income.
3) Master the use of credit
Credit is a versatile tool that can expand your reach and ability to deliver what the market wants. However, it's easy to overextend yourself and become swamped by crushing interest payments if you don’t utilize credit wisely.
Furthermore, business credit cards come with some dangers that personal cards don’t. The cash flow and rewards that business credit cards can provide may be a huge help to a fledgling business but it’s important to weigh your options. High interest rates can quickly make credit card usage more costly than other sources of funds and if you build up too much debt on a business card, you may be damaging your ability to take out future loans as your business grows. In general, avoid charging more purchases on a business card than you can pay off in a single billing cycle to minimize the risk of getting behind.
Manage your personal and business credit by paying off high-interest debt first, so that it doesn't pile up. If being approved for credit is an issue, don’t forget you can obtain copies of your credit reports for free and dispute anything that's inaccurate to improve your credit score.
4) Harness the power of social media
Marketing is essential in getting the word out about your products or services but traditional broadcast advertising can be quite expensive. Using social media is a low-cost way of communicating with potential consumers about the advantages of partnering with your organization. It can also be instrumental in establishing a unique brand voice.
Any entrepreneur who has yet to dive into social media should waste no time getting started. Today, 63 percent of millennials say they stay updated on brands through social networks and 46 percent rely on social media when making online purchasing decisions. If you’re going to stay competitive, there’s no getting around going social.
In the age of social media, people aren’t afraid to voice or share their opinions. Use this to your advantage and pay attention to what your customers are saying about you and your business on social networks. The range of options on different channels like Facebook, Twitter, Instagram and YouTube give you the ability to support and reach out to people in a more personal, meaningful way.
5) Enlist qualified helpers
Trying to do everything yourself can be a recipe for failure. Leave the jobs outside your level of expertise to people who are more qualified to handle them. Professional help is not the place to skimp in order to save money. You’ll spend more money in the long-run fixing expensive errors or running into compliance hurdles that professionals could have avoided. Hire bookkeepers, project managers, virtual assistants, HR services and anyone else you think could keep you on the road to success by helping you focus on managing your core business function.
6) Organize your personal finances
Most business owners lack pensions or retirement plans, which is why it's up to you to be disciplined and store away enough money for later.
As you continue to grow your company, you’ll need to be able to look back and track every penny you spend. Turning a critical eye toward your monthly expenses will help you determine where your money is put to good use and where it’s being wasted. Once you start making money, it can be tempting to “pay yourself first” and give yourself more room for small indulgences. But if you really want to keep more in your pocket in the long run, think carefully before dipping into the till.
A daily budget might seem a bit rigorous initially but it will shed a clear light on all your personal finances, and keep you on the straight and narrow with your spending. Put the money you save aside and feel confident as you watch it grow over the years.
7) Give back
Giving back to your community, through nonprofit donations or volunteer service, is more than just your duty as a responsible citizen. It can have a positive impact on your personal mood and happiness, which will translate into more effective work performance. If money is a bit tight at present, you can volunteer your time at any number of worthy causes. Consider making charity work a team-building activity by taking a day or half-day of work for a company-wide day of giving back.
Money is the engine that drives the progress of your enterprise. As soon as you decide to start a business is the time to develop habits that will eliminate waste and increase efficiency. You'll then find it easier to grow your income, expand into new areas and enhance your own personal satisfaction.
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