“By failing to prepare, you are preparing to fail.” This quote by Benjamin Franklin stresses the fact that productivity and success are only possible through preceding thoughtfulness. It’s true about everything in life, including launching and sustaining a business. And one important part of that process is having enough working capital (the cash you have on hand for everyday expenses) and planning for when you might need more. Read on to learn about five of the situations in which this may be the case.
From an ice cream shop that makes it big in the summer to a snowboarding company that has customers lined up in the winter, many businesses are seasonal and don’t have steady cash flow throughout the year. Some companies even close their doors for certain seasons. If this is your situation, then you’ll need to consider what to do to get the income you need in your slow months.
At some point, you may need to bring on another employee or two for a busy season or perhaps hire a professional in an area of expertise where you are lacking or need additional advice. You can only do this if you’ve thought ahead and laid up some cash for that very purpose.
As a business owner, you will have many directions in which your money flows in and out. For instance, you’ll need to pay your employees, suppliers, and lenders with the profits gained from your customers. Inevitably, your revenue and expenses won’t always match up, so to fulfill your obligations, you may need to find additional sources for working capital.
Although this isn’t a fun topic to think about, you still need to prepare for how disasters in the national (or even global) economy will affect your business. When or how these events happen lies totally out of your control, but you can do things now to have some extra cash in hand as a safety net.
You have your regular day-to-day expenses, but occasionally there are bigger projects that take more time, effort, and of course, money. Some examples are having an office space built, offering a new product or service, expanding your business in a new direction, or adding a new location.
While it might feel daunting to speculate on these types of situations, a little research into obtaining working capital can make your situation seem more manageable. And you have several options available to you: lines of credit, SBA loans, and timely customer payments. In these ways, you can prepare for success.
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