As a small business owner, you know that one of the most important things you can do is protect your business. You’ve likely already taken some steps to do this, but it’s never too late to reassess your risk and make sure you have a solid safety net in place. From the Money Alignment Academy, here are some key things to consider when building a safety net for your small business.
Have Enough Cash
Every business should have cash reserves on hand to cover unexpected costs or unforeseen circumstances. Aim to have enough cash on hand to cover at least three months’ worth of operating expenses. This will give you a cushion to fall back on if revenue dips or expenses rise unexpectedly.
Secure a Line of Credit
A line of credit is like an insurance policy for your business. It’s there to provide emergency funding if you need it, and you only have to pay interest on the amount you borrow. Having a line of credit in place gives you peace of mind knowing that you have a safety net if cash flow runs dry.
Update Your Business Insurance
Business insurance is essential for any business, small or large. It protects you from liability in the event that someone is injured on your property or if your product causes damage. Make sure you are adequately covered by revisiting your policy periodically and increasing coverage as your business grows.
Add a Home Warranty If Your Business Is at Home
If your business is home-based, consider purchasing a home warranty to protect yourself from unexpected repairs. A home warranty covers the cost of repairs or replacements for appliances and systems in your home, giving you one less thing to worry about if something breaks down. With home warranty companies in Arizona, read reviews and look for an agency that provides the type of coverage you need as well as reliable customer service.
Add Recurring Revenue Options
Diversifying your revenue streams can help insulate your business from downturns in the economy. If possible, move away from a one-time purchase model and instead focus on selling subscriptions or memberships with recurring revenue. This will give you a steadier stream of income that you can count on week after week, month after month.
Move to an LLC
Protect your personal assets by converting your business designation to an LLC (limited liability company). This designation shields your personal assets from being seized if your business is sued or unable to pay its debts. You’ll also have new tax benefits that can help you save money. A formation service can walk you through all the steps.
Check Cash Flow
Keep tabs on your cash flow so that you can identify potential problems early on and take steps to correct them. There are several ways to do this, but one simple method is to set up alerts in your accounting software that notify you whenever cash falls below a certain threshold. This will give you time to take corrective action before things get too dire.
Small businesses are susceptible to risks that larger businesses are not. That’s why it’s so important for small business owners to build a solid safety net for their businesses. By taking steps like building cash reserves, getting adequate insurance, and diversifying their revenue streams, small business owners can protect themselves from financial disaster. This way, you can ensure that your small business is prepared for whatever challenges will come its way.