Now that your long-awaited small business loan has been approved, is the fresh influx of cash burning a hole in your pocket? It’s tempting to start writing checks, but keep a cool head. Focus on your key priorities and use your funds where they’ll have the greatest impact.
You need to know how far your loan will take you and for what purposes you’ll use it.
After weeks of crunching numbers, assembling documentation and breathlessly awaiting a decision from the bank, you finally got the long-awaited approval on your small business loan. Give yourself a pat on the back and maybe a celebratory evening out with your family, but don’t let the fact that you can breathe a bit easier about money for a while let you lose sight of your business goals. Follow these basic DOs and DON’Ts to make the most of your business loan.
Build your budget. Clearly articulate your operating costs for inventory, leases, payroll, marketing, supplies, licenses and registrations, equipment and supplies. Make sure you are clear about your break-even number as well as what it will take to be profitable. Many businesses don’t turn a profit in the first few months or even in the first few years. You need to know how far your loan will take you and for what purposes you’ll use it.
Put it in writing. Unfortunately, it’s just too easy for two parties to misunderstand the spirit or intent of a verbal agreement so make sure that you put all agreements pertaining to your business in writing. In fact, your state may have specific requirements about certain contracts or agreements that must be put in writing. A good rule of thumb for when a contract or agreement should be put in writing is when it will last longer than one year or has a value of more than $500. A written contract helps eliminate some unpleasant surprises. After all, you don’t want to spend any of your hard-won business loan money on avoidable attorney costs.
Hire the right people. Employees who are the right fit for you and your customers can literally make or break a business. Not only is it important for you to be able to trust your employees to help you succeed, but you need to feel confident that they’ll serve customers according to your exacting standards. The right fit is essential; a small business can’t afford to have personnel issues that could possibly be avoided.
Seek advice and input. Mentors and advisors along with classes, workshops, books and articles, research and other resources can provide valuable assistance in navigating uncharted waters. Listen attentively with an open mind to advice from your mentors and other sources. They are a valuable reserve of direction and insight. However, don’t let them cause you to lose sight of your end game. Listen to advice but also trust your instincts.
Obtain required licenses and permits. It’s tough to turn a profit if you’re shut down for a permit violation, so be sure you’re aware of all licenses and permits you’re required to have. Familiarize yourself with any city, county or state inspections that may be required and any other regulatory requirements to which your business may be subject.
Don’t take on needless debt. Your loan may have you feeling flush with cash right now but avoid taking on new expenses if you don’t have to. For example, if you’ve been running your business out of the garage, it’s tempting to rent office space at the most upmarket address in town. In reality, any reputable office space will be a big step up from bunking with the family cruiser. Prioritize your needs to make the most of your loan.
Don’t rest on your laurels. You may have a killer business concept right now but it’s important to look for ways to hone products and services for a higher profit margin. It’s also advisable to be on alert for expansion opportunities and logical extensions of your existing product line. Of course, you need to focus on establishing the core products, but keep that entrepreneurial mindset well honed.
Don’t try to do it all. Although it’s important to KNOW all the facets of your business, you don’t have to DO all the facets of your business. Identify the areas where your contributions will have the most impact in building the business and look for ways to streamline, eliminate, delegate or outsource other responsibilities for the sake of your business success.
Don’t neglect your finances. Your priority is to sell your product or service, but you also have to pay attention to administrative details that can pack a wallop if neglected. Keep accurate and timely records of your accounts payable and receivable as well as sales, profit margins, expenses and other key financial metrics. Be sure you’re clear about what taxes you need to pay for your business and your employees and make sure you pay on time to avoid IRS penalties.
Don’t neglect customer service. You can have the best product on the market, but if you frustrate or alienate the customers at every turn, you won’t be in business for long. Stellar service can cement relationships and build loyalty that will keep customers coming back again and again.
By focusing on these simple tips, you’ll be able to focus your efforts on your business priorities and be well on your way to an even more successful business.
Kelly Burkart is a freelance writer from Minneapolis, Minn. While she has spent most of her time writing about financial services the past 15 years, she has also explored and written about everything from cardiovascular health to travel, higher education and sustainable energy practices.