How small business owners can prepare and protect their finances in 2023

Worries about inflation and the coming recession are just some of the concerns small business owners have as they head into the new year.

Elizabeth Gore, co-founder of small business funding platform Hello Alice, said local business owners are concerned about the unknown, including unforeseen disasters such as wildfires and floods, but also optimistic after a strong holiday shopping season.

“Small business owners do better when they know there’s a full-blown crisis so they can plan for it,” she said.

“Premiums were really high for holiday shopping, and we’re seeing people move to software to increase their spend and operational value, so there’s so many new businesses opening up, which is super exciting.”

Rob Eyler, a professor of economics at Sonoma State University, said the two things that worry small business owners the most are rising workers’ wages and rising prices of goods and raw materials.

“(Increasing wages) makes you rethink how many people you should hire, so that’s usually the No. 1 priority. 1 for small businesses,” Eyler said. “So if there are wage increases that you can’t really control, how does that change your earning capacity?”

Here are some ways small business owners can prepare and protect their finances in the coming year.

Continue to monitor interest rates, cash flow and current debt

Eyler said business owners who have debt should talk to their lenders to try to restructure the money they’re borrowing to make doing business with them more affordable.

“Try to assess current cash and current debt and what that means in terms of your ability to get through this really tough time,” he said.

Interest rates have been steadily rising since last year, and Gore said business owners should look at current credit card and loan interest rates to make sure they’re not too high.

“I’m a big fan of local banks in Sonoma County. I think we are very blessed to have banks that are owned and operated by citizens who actually live in the county,” she said.

“If you have a national bank that you work with and you have a high interest rate or the bank doesn’t offer the products that you need, come into Summit Bank or Redwood Credit Union or one of our local banks.”

Conduct a cost audit

Gore said small business owners should look at each underlying expense and assess whether it’s worth the expense or if that money could go to another area of ​​the business, such as a software upgrade.

“Sometimes people shy away from software, even though it can actually save you a significant amount of time and money,” she said.

“People (who) have been in business a long time tend to forget about something that’s paid monthly, especially if it’s been on the books, so doing an expense audit could really surprise a lot of people.”

Eyler said business owners should also decide whether they can afford to hire more workers as wages and costs of doing business have risen.

Diversify capital and plan ahead

Gore suggested that browsing local government and small business administration websites could reveal money in the form of grants or loans that small business owners can keep an eye on.

“You have to dig into those .gov websites,” she said. “There’s money lying there that we just don’t know about.”

She also suggested considering a line of credit and business insurance in case of emergencies, such as damage caused by a forest fire or flood. She said even just 30 minutes of research can make a difference.

“We live in a disaster-prone environment,” Gore said. “I’m happy to see more small business owners getting insurance because before the fire most didn’t have it so I encourage people who live in this area to get good insurance.”

Assess your current financial environment

Gore and Eyler emphasized evaluating current interest rates and what they look like for business between now and a few years down the line.

Gore said business owners should also be careful not to overcapitalize due to high interest rates.

“Read the fine print on anything you’re applying for like loans or credit,” she said. “You do things in stages and phases, so if you hope to have a company of 50 people in two years, don’t hire 50 people right away.”

Listen to customers

The most valuable place where money comes from is customers and clients. Gore said business owners should listen to the suggestions coming from them, whether they are looking for or continuing to buy the same product or service.

“At this point, I’m constantly encouraging people to really talk and listen to their customers because that’s where your hot cash flow is going to come from,” she said.

Stay connected with local officials

Gore also emphasized staying connected with local officials and organizations where business owners can get credit, such as local banks or the Small Business Bureau.

“I think we tend to go to those places when it’s urgent, and actually if you develop those relationships, I think that would be a huge asset before you need it,” she said.

Staff writer Sara Edwards can be reached at 707-521-5487 or [email protected] com. On Twitter @sedwards380.

Leave a Reply

Your email address will not be published. Required fields are marked *