Efficiency In Operations
You’re likely going to need a loan or some line of credit in order to keep your business operational. This is especially true when you’re just starting out. A business usually between five and ten years to stabilize; 33% last so long. Many investors consider the length of a business’s tenure when approving loans.
Unfortunately, the economic market is kind of like waves at sea in a storm. Sometimes you’re on the crest of a tidal monster, others you’re in a valley between massive waves and there’s no getting to the top. Then the storm ends, everything is placid, and you sort of float where you are.
What you need is a kind of anchor to keep your business at a high level regardless of fluctuating economic waves. Establishing that anchor is the difficult part, but one of the best ways to go about it is to streamline operations, and take your time. If you’re going to take out a loan, only do so when the time is right. Don’t rush.
Consider this scenario: your business is a club that does about $1,000 worth of business on the weekends. You pull in $4,000 a month. But rent for the facility where the club hosts entertainers is $2,000 a month, and you’ve got to pay entertainment $1,400. You and your spouse run it. You’re only netting $600 a month.
The thing is, if you can hang on for two or three years, you’ll build enough of a following to double your weekend yield and expand outward. But your spouse isn’t having it! A very smart go-getter, your spouse has a great idea to get things moving more quickly. The idea? Add food options in addition to adult beverages.
This sounds like a great idea on the face of it, but you’ve got your reservations. Well, your spouse talks you into it anyway. As it turns out, you’ve got to develop dishes that are easy to prepare, likely to be purchased by club patrons, and are prepared by a cook. Then you’ve got to get servers.
To top it all off, the kitchen must be inspected, cleaned, and configured to serve the public. All these things are going to cost you about $10,000, when all is said and done. Your business won’t make that much profit for the next year and a half—you and your spouse have kept your day jobs, after all.
So you take out a loan. And for a while, things work! But…people aren’t buying enough food to justify the kitchen staff or the servers, not enough people are showing up on the weekends—you just can’t rush your increased patronage. The business dies.
If you had waited until you had more steady customers, you could have afforded the addition of the kitchen, increased revenue, and paid the loan back on time. All you would have needed to do is wait an extra year or two.
The loan can be a great idea, but you’ve got to do it when the time is right, or risk shooting yourself in the foot. But if you’ve decided getting a small business loan is right for you, there are actually several solid options available, like the small business 7(a) loan.
According to SmallBusinesLoans.co, an agency offering help with small business loans: “Qualifying for credit is usually a tedious process, so always document the financial statements of the business prior to applying for a business loan.” Ensure you’re making a profit that can be paid back before you get the loan.
What you’ve got to do to make everything work how you intend is plan ahead. It can be tedious, but it is worth it.
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