As a small business, you have many advantages and disadvantages over a larger business. As a small business owner, you have the ability to go after smaller opportunities, be more prudent with expenses, and offer customers improved flexibility. While you may be taking advantage of the benefits of being a smaller business, you may not be looking at bigger businesses for ideas on how you can run your business more efficiently and catalyse your businesses growth.
Hedge Your Bets
Larger businesses will sometimes utilise hedging strategies to address over-exposure to a certain economy, asset-class, or commodity. To give an example, as an airline your business may be particularly vulnerable if oil prices rise. Therefore a larger business would consider going long on oil, perhaps through a leveraged account, so if oil prices rise they will earn money from their position and earn less money from tougher trading conditions. If oil prices fall, they will lose money through their position and earn more money from trading. An airline’s focus should not be on how they expect oil prices to move; it should be about focusing on their core competencies.
Hedging can be used in your small business too. Particularly exposed to a certain economy? Consider buying and selling certain currencies. It’s also not necessary to have large cash reserves to enter positions in currencies. You could use a leveraged account, and enter a $200,000 position for $1,000. If you reach the stage where you get hit with a margin call, your business should be thriving from its improved trading conditions.
Invest In Your Brand
Small businesses very rarely spend money on their brand. Most small business owners believe advertising and marketing serves one purpose: to drive action there and then. Larger businesses have patience and are willing to invest in winning business on longer sales cycles.
When Nike spends $150,000 on a TV advertising campaign, they don’t see an immediate lift in sales. They expect that those who view the advert will engage with their brand at a later stage, and when it comes time to buy a pair of trainers they will be at the front of consumers’ minds.
Consider how your brand is perceived. Consider how your company is positioned within your industry, and consider public relations too. What unique qualities do you want to portray in your business, and how do you intend to get the message across?
Say Goodbye To DIY
Smaller businesses are always focused on how they can do things cheaper. Bigger businesses are too, but only when there isn’t an obvious sacrifice involved. Many small business owners have their hands in too many pies; they will do their own accounts, create their own website, write their own terms and conditions, and create their own logo. For those that are bootstrapping their business, this may be the only way to get things done. But you should recognise that in most cases you are making a sacrifice; use an expert, and make sure you do your due diligence to ensure the expert is qualified.
Not having enough available credit can cause problems ranging from losing a substantial sale because you don't have the cash handy to buy the necessary materials to fill the order to having to shut down the company because you can't make payroll. The remedy to the problem is to apply for additional credit and some credit sources will interpret that as inept management. They may ask themselves why you weren't able to correctly forecast your needs in the first place. Or even worse, that you aren't fiscally responsible.
Getting more of a small business loan than you need may seem like a good idea but it can lead to a cavalier attitude toward expense control. "If you've got it, spent it" is not a suitable motto for any company. And credit costs money, if you use credit to pay for expenses that you have adequate cash for, you incur unnecessary interest expenses.
So how do you know what level of small business loan is just right for your business? That's what cash flow projections are for. Every business owner should sit down once a month and project their cash requirements for the next six months. For example: You may know that the summer months are your busiest months. Sales will double for the months of June, July, and August. But since you offer 60 day payment terms to your customers, you won't see that cash starting to come in until August. And you've had to fund, somehow, the sales for June and July.
That's where a small business loan comes in. You can use a revolving credit line to pay for your needed inventory in June and July and start paying the credit line back down in August, September and October. The trick is you can't start looking around for a credit source in July. If you've done your cash flow projections you'll know what your requirements are in enough time to find the credit source you need, at the terms right for your business.
Credit, of course, can be used for emergencies such as repairing broken equipment. Or to pay a one time yearly expense and then spread the credit payments over the entire year.
It can also be used to help a company grow.
Introducing a new product almost always take longer than anticipated. Reaching a new target market requires patience, time and money. There can be delays in regulatory approvals, getting a patent, acquiring licenses. Moving to a new facility may mean additional unbudgeted expenses.
A small business loan, used carefully, can help solve these situations and others. It can be a cushion against the unknown and a good financial management tool.
Both Naz Daud & Dee Power are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Naz Daud has sinced written about articles on various topics from Real Estate, Ezines And Newsletters and Business Promotion. CityLocal, the UK’s fastest growing local directory, provides a for smart entrepreneurs that know the time is. Naz Daud's top article generates over 60500 views. to your Favourites.
Dee Power has sinced written about articles on various topics from Credit Cards, Sales and Negotiation and Business Plan. Do you need a small business loan, credit card, or grant? Want to know about other ways to finance your business? Find out more at