Thank you to Guest Writer, Sharon Wagner.
Sharon Wagner uses her site Senior Friendly to offer advice geared specifically toward seniors to help them make healthier choices and enjoy their golden years.
For any small business, a safety net is an absolute must. A safety net is a plan or system that helps you avoid financial ruin if your business faces unexpected problems. Building a strong safety net takes determination, and you may find certain tactics cause a little friction. In the long run, however, taking steps to protect your business during difficult times will prove worthwhile.
Grow Your Cash
A cash reserve is an emergency fund that provides cash flow in the event of an unforeseen problem, like losing a major client. You should aim to have enough money in your reserve to cover three to six months of operating expenses. You can build up your cash reserves by setting aside money each month or by earning interest on investments.
Closely Watch Your Cash Flow
As you build your reserves, take steps to watch your cash flow too. This means tracking the money coming in and going out of your business on a regular basis. This allows you to avoid becoming overwhelmed by unexpected expenses or falling behind on bills. Additionally, knowing where your money is going can help you to make more informed decisions about how to allocate your resources.
Consider a Home Warranty for a Home-Based Venture
In addition to business insurance, you can benefit from a home warranty if your business is home-based. A home warranty helps protect against unexpected repairs and replacements for items like appliances, HVAC systems, and plumbing fixtures. In addition, having a home warranty can give you peace of mind knowing that if something goes wrong, there is someone you can call for help. There are numerous home warranty companies in Florida, so shop around to find an agency that offers great customer service and the right coverage.
Assess Your Business Insurance
Business insurance is another important part of creating a safety net for your small business. Insurance can protect you from liability if someone is injured on your property or if you are sued for professional negligence. You should review your insurance coverage annually to make sure it meets your needs. You may also want to consider purchasing additional insurance, such as product liability insurance or errors and omissions insurance.
Update to an LLC
If you are designated as a sole proprietorship or partnership, you may want to consider converting to an LLC. An LLC offers liability protection for the owners of the business, which means that their personal assets are protected in the event that the business is sued. An LLC also offers tax benefits and can make it easier to attract investors. You can quickly accomplish this conversion through an online formation service.
Request a Line of Credit
A line of credit is another way to ensure you have access to cash when you need it. A line of credit is essentially a loan that you can tap into as needed. The benefit of a line of credit is that you only pay interest on the money you borrow, not on the entire loan amount. You can get a line of credit from a bank or other financial institution.
Carefully Organize Your Financial Documents
It’s also important to keep your financial documents organized. This enables you to access files as quickly as possible. One way to do this is to use PDFs. PDFs can be easily emailed or downloaded, and they’re compatible with most software programs. You can also edit PDFs to remove or add pages. Plus, they can be password-protected for extra security.
Creating a safety net for your small business may seem like a lot of work, but it’s worth it. Taking steps like building a cash reserve, getting a line of credit, adjusting your business insurance, converting your business designation to an LLC, and buying a home warranty can help safeguard your business from uncertainty.