Financial
Tips on Growing Your Small Business
Companies with 100 or fewer employees dominate the American business landscape.
They now employ 60 percent of the work force. Further, entrepreneurs with small
businesses continue to generate most of the new jobs. Strength
in numbers, however, doesn't mean running a small business is easy. The lack of
economics in scale, particularly in the benefits area, can pose some thorny problems.
Here are some ideas for growing a small business in today's competitive environment.
Managing business assets
profitably. According to US News & World Report, the three major reasons
why small business fail are insufficient profits (22 percent), poor growth (20
percent) and too much debt (15 percent). The challenge for you, as a small business
owner, is to manage your business assets as effectively and efficiently as possible.
For starters, you need
to know how much your business is worth--really worth. This means you need the
perspective of your creditors and lenders. It would be time well spent to meet
with a financial advisor who can help you determine typical rates of return in
your area of business, average company earnings, current book value and projected
rate of growth. Repositioning
cash reserves for higher yields can affect your bottom line. Consider putting
funds that you don't need immediately in higher yielding securities which don't
increase your risk significantly; such as, intermediate term CDs, money market
funds, and bond funds. Also investment in dividend-paying stocks or in tax-exempt
municipal funds can slash your business taxes. Managing
employee benefits carefully. The challenge for you as a small business owner
is to attract and keep good employees while controlling the cost of fringe benefits.
Small companies have choices other than straight health benefits. Flexible
spending accounts allow employees to use pre-tax dollars to pay for day care,
medical care premiums and other specified expenses by creating a benefit package
that includes a cafeteria plan. Other
benefits that you can offer might include group disability coverage, group life
insurance or a SEP-a retirement plan for small businesses that is the lowest in
cost and easiest to set up and administer. By
Susan O'Conner, IDS Financials
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