The most basic tenant of business is that to be successful, you must earn more than you spend. But even more important is saving money for a rainy day—and the current climate is a perfect example of why. COVID-19, also known as coronavirus, is wreaking havoc on all businesses, but especially local businesses. All of this is forcing local businesses to adjust their hours or even close to comply with local health ordinances. Many are losing money and could certainly benefit from some extra money in the bank.
Photo Credit: U.S. Embassy Nairobi / Public domain
No one knows this better than FUBU founder Daymond John. In 1992, he returned from the company’s first retail trade show with $300,000 in pre-orders—but didn’t have the money he needed to get those orders to customers. He tried applying for a loan but wasn’t sure how to fill out the paperwork. He was rejected by 27 banks and eventually turned to his mother, who mortgaged her home for $100,000. This move paid off: FUBU went on to generate $350 million in revenue over the next six years.
“I got my first piece of advice when I was 22 years old, from a guy who owned a little bodega in my neighborhood,” John said in an Inc. article. “He told me, ‘If you really want to start a company, you better dig under your couch for a couple of extra dollars; you’ve got to stop going out to dinner four times a month; you’ve got to trade in your car for a cheaper one, and raise that $40,000 or $30,000, if you can, by yourself.’”
Every business, no matter how big or small, should be saving money. Business Daily outlined some common excuses that small business owners make for why they can’t save money. Let’s take a look at these and learn more about why they’re so misguided.
Excuse 1: I need to make more money before I can save.
As long as you’re making more money than you’re spending, you should be saving. You’ll always find a new excuse not to save, even when your revenue increases. Try saving a percentage of each month’s revenue and increase that percentage as your revenue goes up.
Excuse 2: I need to save for something specific.
Sure, you might want to save for something specific, like new equipment or remodeling your store. But you shouldn’t let that prevent you from saving money for unexpected expenses, like water damage due to a burst pipe or lack of foot traffic due to a global health crisis. There’s no telling why you might need some “just in case” money, which is why it’s so important to have it in the bank.
Excuse 3: How do you save when spending is so tempting?
Having money in the bank makes it more tempting to spend. Spending money is necessary and, yes, fun. But, it’s also incredibly satisfying watching the amount in your business savings account continue to increase. Try to resist the temptation to make impulse buys, or remove the temptation completely by taking your savings out of a traditional account and putting your money into investment or fixed-deposit accounts, which produce greater returns.
Excuse 4: Cash flow is tight; I can’t afford to save.
Yes, you can—even if it’s a small amount. You’ll be glad you did when the day comes that you need to dip into your savings. Try setting a financial goal and take small, manageable steps to achieve it.
Excuse 5: I don’t have any disposable cash to save.
Business Daily lists several ideas to help free up funds to save:
- Share office space with another small business or adopt a virtual business model.
- Run your business from the cloud—it means avoiding expensive hardware and the staff to maintain it.
- Pay invoices on time and avoid late payment fees
- Cut down on meetings and focus on strategic functions instead.
- Outsource work such as design and copywriting rather than hiring a full-timer.
- Hire interns to help out with admin work.
No matter how big or small your business may be, one fact remains the same: start saving now. If the day comes that you need to dip into your extra cash, you’ll be glad you did.
- “Play Customers Their Favorite Song” – SUCCESS STORIES Podcast: Ep. 9 (feat. Brett Bowden of Printed Threads) - November 23, 2020
- Don’t Pass on These 5 Trendy Puffer Jackets - November 12, 2020
- “How to Run Apparel Programs for Big Brands” – SUCCESS STORIES Podcast: Ep. 8 (feat. Jordy Gamson of Icebox) - November 10, 2020