Startup Tuesday: How to Responsibly Grow a Small Business
Posted by Guest Author on July 16, 2013 in Business Financing, Startups [ 0 Comments ]
It’s a good time to be in small business. As the economy continues to recover from the recession, the US government has cited small business entrepreneurs as leaders of job creation and economic growth. Legislation like the Small Business Jobs Act of 2010, which works to promote small business entrepreneurship through new loan programs, only serves to further highlight this role. Sounds pretty ideal, right? However, the business world can be a fickle friend, so you want to be sure it works with you financially. Learn to grow your small business responsibly with these tips.
Knowing how to add and subtract doesn’t necessarily mean that you know how to keep your business’ books. Accurate accounting is vital to the success of your business, and your company could run into some serious problems if you don’t do it correctly. QuickBooks is a great accounting solution, but it can be pricey (at least $200 a pop). If you’re looking to account on a dime, consider products from Wave Accounting, Freshbooks, and Zoho Invoice. And when your business can afford it, unless you’re a fan of visits from the IRS, hiring an accountant to manage your books could be worth the cost.
Know How Much Debt is Right for You
Debt may sound like a dirty word to most budding entrepreneurs, but taking some of it on is often critical to business growth. A good loan can give your business the push it needs to reach its full potential, but just because you qualify for a line of credit doesn’t mean you should take it. The key is to pick the right size. Use these debt-to-income ratios as a guideline:
- Your front-end ratio, i.e. your total monthly housing cost divided by your total monthly income, shouldn’t exceed 28%
- Your back-end ratio, i.e. the sum of your total monthly housing costs and your total monthly debt payments divided by your total monthly income, shouldn’t exceed 36%.
While these ratios aren’t set in stone, they’re useful rules to live by. So before you take out a loan, do the math. You’ll be glad you did.
Hire Employees the Right Way and At the Right Time
There comes a time in every startup company’s life that it’s time to take on new employees. The signs are usually pretty obvious. Good indicators are if you’ve been seeing consistently positive financial growth in your company or your employees are working hard and often still don’t have enough time to finish all the tasks they’ve been asked to complete. If there are skills that your current employees don’t have that you need if you want to expand your business, it may be time to hire.
Once you know that you need to hire a new employee, make a detailed job description complete with skill requirements. Figure out exactly what you want in a new employee, and don’t settle for anything less. It may take a while for you to find the right fit, but a rock star new hire is always worth the wait.
Growing a business responsibly is about more than paying your taxes and not defaulting on loan payments. Whatever your business, you want to be sure that it impacts your community in a positive way. Whether that involves creating jobs for people in your community, contributing to local charities, or keeping your company environmentally conscious, you’ll feel more confident in your business if you know that it benefits more people than just you.
Author Bio: Liz Jacob is a writer for Biz2Credit Business Loans, the #1 online credit resource for small business loans, business loans for women, equipment financing, working capital and other funding options. Visit www.biz2credit.com and follow @biz2credit on Twitter for company and industry updates.
(Image Source: freedigitalphotos.net by adamr)