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Author: Poppy Williams  <poppy@techbizguide.com>

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Starting and running a small business is no small feat. It demands an entrepreneurial spirit and a strategic approach to ensure longevity and success. In the vast landscape of entrepreneurship, creating a safety net for your business is akin to laying a foundation for a house; it’s crucial for stability and growth. Through this guide, Keystone Business Brokers will walk you through the essential steps to developing a financial and operational safety net that supports your small business through ups and downs.

Crafting Your Financial Blueprint

Your journey to a resilient business starts with meticulous budgeting. You need to establish a comprehensive budget that details every income source and expense your business encounters. This financial discipline is paramount. It ensures you don’t overspend and that your business lives within its means. A well-maintained budget acts as a navigational chart, guiding your financial decisions and helping you steer clear of financial turmoil.

Optimizing Your Workspace

Having a contingency plan for cost-cutting and expansion is crucial for business sustainability. Consider exploring options such as renting a larger residential property with a designated home office or spare room, offering a cost-effective solution compared to traditional office spaces or coworking arrangements. Online listings provide a convenient way to search for rental properties, allowing you to filter based on your specific criteria, including price range and desired amenities.

Using Credit Wisely

When used smartly, credit cards can be a boon for your business. The key is to utilize them for necessary expenses and clear the balances each month. This strategy prevents the accumulation of interest and helps maintain a positive cash flow. By avoiding the debt trap, you ensure that your business’s financial health remains robust, allowing for more strategic investment and growth.

Forming a Limited Liability Company

Forming an LLC is a strategic step for many entrepreneurs, offering a flexible business structure that provides limited liability protection and potential tax advantages. This ensures your personal assets are safeguarded from business liabilities, making it a preferred choice for small business owners. To avoid hefty lawyer fees, you can either file the paperwork yourself or use a formation service, which simplifies the process and reduces costs. For instance, https://www.zenbusiness.com/ offers a user-friendly platform to help you set up your LLC efficiently and affordably, allowing you to focus on growing your business.

Auditing Your Finances Regularly

Periodic financial audits are your eyes and ears on the ground, highlighting inefficiencies and risks that could derail your business. By regularly examining your financial activities, you can pinpoint areas for improvement, cut unnecessary costs, and refine your business model for better profitability. Think of these audits as a health check-up for your business, essential for its long-term well-being.

Navigating Tax Obligations

Keeping up with tax laws and regulations is non-negotiable for any business. Staying informed helps you minimize tax liabilities while remaining compliant. This proactive approach ensures you leverage tax advantages effectively and avoid penalties. Regularly updating your tax strategies in response to legislative changes can save you significant money and keep your business in good standing.

Goal-Setting for Growth

Defining clear financial goals gives your business direction and purpose. Whether it’s increasing sales, expanding your market reach, or reducing operational costs, setting specific objectives focuses your efforts and resources. This strategic planning is not just about growth; it’s about sustainable, manageable growth that aligns with your vision for your business.

Building a safety net for your small business requires strategic decision-making, careful planning, and ongoing vigilance. Adhering to these guidelines lays a strong foundation supporting your business’s growth, resilience, and success. The path of entrepreneurship is filled with challenges, but with a robust safety net in place, you’re well-equipped to navigate them and thrive.

At Keystone Business Brokers, we’re not new to the game; we are backed with a ton of experience in commercial and business brokerage. We have in-house, over 60 years of experience with business and real estate brokering, as well as contacts in many Philadelphia area businesses. Visit our website to learn more!

Researching Your Competitive Marketplace to Gain Advantage

By Using Porter’s 5 Forces

The small business arena has been in flux for well over a year due to the COVID-19 pandemic.  Huge shortages of products during the early stages and the reluctance of consumers to go out in public.  Many resilient entrepreneurs during the pandemic have become creative in offering deliveries, outside dining, and revamping their inventories.  In this new streamlined economy, small businesses must keep adapting to the changes that are inevitably coming.

A great analyzing tool is “Porter’s 5 Forces” which is a model developed by Michael Porter of the Harvard School of Business.  It looks at five competitive market elements of your business allowing you to fine-tune operational strategies.  

When developing your strategy using these five strategies conceived by Professor Porter the small business owner can develop a superior competitive strategy. 

 Porter’s 5 Forces

Suppliers Bargaining PowerThe characteristics of your supply chain are a big factor in the amount of control that the suppliers have over buyers.  The fewer suppliers the greater control they have over the pricing and distribution of products.  When many suppliers are offering the same type of products and costs for changing to a competing supplier are low, a company can increase its profits by switching vendors.

Buyers Bargaining Power

When buyers’ Bargaining power is high they have numerous buying options. If there are choices limited they have limited power.  When a competitor can supply a product that is identical or a substitute for an existing one at a lower price the buyer has a choice. 

Substitute Threats

During the current pandemic, the supply chain was unable to keep up with demand.  As we all remember many products were not available and substitutions became a standard practice.  Some of those substitutions proved to be better than the ones we were used to purchasing.  

Industry Competitors Rivalry

If a product is generic and there are many competitors in the marketplace each supplier has to determine what makes their product appeal to customers.  Knowing what customer base you are targeting will give you an edge. Quality, low price, distribution method, and services offered are factors to consider.  When competing with a large corporation that has a competitive advantage a small company should offer boutique products that the larger firms are ignoring.  An example is the proliferation of craft breweries.

New Entrants Threat

Barriers to entering a new venture can be high or low depending on the type of organizations are currently holding the dominant market shares. Porter states that economies of scale are an advantage to large enterprises due to their ability to produce on a large scale reducing the cost per unit.

Capital requirements are a factor in the new entry of competitors entering the marketplace.  Production of custom products on a small scale using new technology such as 3D printers creates a niche for small producers.  They can advertise through social media and distribute through online vendors.  There is usually little threat of retaliation by large producers since these are low production items. 

If businesses periodically review Porter’s 5 forces and adjusting their strategies to the changing economic conditions, they will have a competitive advantage over their rivals.

Citation

Porter, Michael E. “The Five Competitive Forces That Shape Strategy.” Special Issue on HBS Centennial. Harvard Business Review 86, no. 1 (January 2008): 78–93.

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