As a small business owner there are probably a lot of things you didn’t realize you would need to know when venturing out on your own.  One of those is how to make sure you have enough funds to stay in business, either in slump times or when you are planning an expansion.  There are some common sense things you can do to help assure you have sufficient cash flow to pay your bills.  You need a budget.  If you are using a software program, it should be easier.  If not, go old school with a pencil and columns on a piece of papers.

Expenses
First you need to know how much it is costing you.  Sit down and write it out; don’t approximate.  That means you go through all the receipts and find out all your expenses.  Start with overhead.  Those are the costs that will go on whether you sell anything or not.  Usually they are rent, utilities, computer fees, salaries, insurance, etc.  Then list anything that is directly linked to your product or service.  Next list any other expenses.

See if there is anything you can cut.  Look at that last column of “other”.  There probably are no luxuries there but check anyway.  Can you negotiate a lower cost for the materials you need to do business, while maintaining a reasonable quality of product?  For example, if you were setting up a household budget, you would compare the prices of a loaf of bread and jars of peanut butter and jelly to pack a daily lunch versus the $10 super size fast food meals.  

Keeping down costs, especially in the beginning and during transitions, is a key component to your success.

Income
This is where you look at what you are making in sales.  If your business is in trouble, this is probably where you recognize that your price is not high enough to cover your expenses, or not enough to pay the salaries, or no profits.  

From this point you need to see if you can reasonably raise prices.  If your prices are set to make money as compared to what you pay for the goods, then there are two scenarios:  you need to attract more customers or diversify to sell similar items to existing customers.  A crafter who makes Christmas wreaths could expand into centrepieces.  If those work well, the crafter can expand to wedding table décor and market to small or mid-sized wedding planners.

Reports
Review the numbers every day.  Don’t let accounts receivables get away from you.  Make polite reminder calls.  If possible pay your bills in time to take advantage of discounts or at least avoid late charges.  

At the end of all of this you need to decide whether to try for an infusion of cash through a loan or an investor, or whether it is really worth the anguish to continue in this enterprise.  As difficult as it might be, it may be to your advantage to step out; digest all that you have learned, and then try again with better preparation and knowledge.

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- The Capex Team