For a small business to grow and thrive it needs to have a strong base to build from. This base is created first with the development of a comprehensive business plan, and then with good finances and a watertight business insurance policy.
What will your business plan do for you?
Most entrepreneurs put together a business plan of some kind when they start out, but only a really good plan will be constantly used throughout the first years of running a business and will be continually evolving to match the needs and projections of the business in the future.
Without a business plan how will you know where you want your business to be and how you are going to get there? This is essentially what a good plan will do for you – it keeps you on course when times get tough. The cash flow part of your plan will ensure that you know where you stand financially at any given time; the marketing part of the plan will help you to keep an eye on your end game and also on your competitors; and the mission statement part will remind you why you started the business in the first place
Business plans can also help you to secure the finance you need to get started, or if you are already up and running they can be useful for getting extra funding or the interest of investors.
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Does your insurance give you complete cover?
Business insurance is a very broad term and many self-employed professionals and tradespeople don’t feel it applies to them. When striking out on their own many people don’t realise that they need specialist insurance or what types of cover are available. And the policy which you buy during your start-up period may not be enough to cover all your needs once you’ve been going for a while.
Most business owners are aware that public liability insurance is important, but they may not be fully aware of the exclusions on the policy they buy, meaning that they might not be covered at a time when they most need it.
Employers 'liability insurance is a legal requirement for any business that employs one or more people, whether on a full-time, part-time or casual basis. Lots of small businesses either don’t have enough cover or don’t have cover at all, which could earn them a serious fine. It could also mean financial ruin for a business if an employee wins a large compensation claim against it for an injury or illness that occurred during their employment.
Other useful types of insurance are: professional indemnity, which covers a business from negligence or bad advice; stock cover; tools and equipment cover; cash cover; legal expenses; business related contents cover & commercial vehicle cover.
Every year when you renew your insurance policy, check to make sure you are covered for all the relevant areas of your business activity.
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Will your business finances go the distance?
Your cash flow forecast plan helps you keep an eye on your finances, but in order for your business to grow you need a stable financial base. Some businesses get this from their sales revenue, however many others need to borrow money in order to make things happen. Where you borrow money from and the type of lending facility it is can have a serious impact on your business.
Banks are the obvious choice for borrowing business funds, however they are not necessarily the most stable as evidenced from the current credit crisis. Lending facilities from banks are also subject to interest rate rises and potential recall of the debt.
If your funding comes from an investor, make sure their own finances and motives are sound. If they are only looking for a short term investment but you are planning long-term, you could find yourself short of finance when they buy themselves out.
Asset-based lending can often be the most stable finance option in the early years of a business. An example of this is invoice finance, where a lender will advance money to a business based on their outstanding invoices. Because the debt is secured against the invoice and the invoice is due to be paid by a client, the debt will usually be repaid in a matter of months. Not only is this a more secure form of lending than taking a loan but it can also help stabilise cash flow because the business knows exactly when they will receive payments.
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This article was first published on Simply Business