Everyone should have a little money set aside for a rainy day, including small businesses. Additional funding can be difficult to secure when you need it the most, so the trick is to plan ahead and have funding in place before you need it. If you do, you’ll be able to keep your business going in the face of adversity, whether the challenge before you is simply a slow season or something more serious like a natural disaster. Here are some tips for making sure you have the capital you need to keep your business going in the face of an unexpected emergency.
Look at all of your expenses when planning your rainy day fund and makes sure you’ve got all the bases covered. You’ll need to be able to keep paying employees salary and benefits during a time of crisis as well as keeping up with legal requirements, equipment maintenance and payments to suppliers. Small business owners should also try and save money personally as they often have much invested in their business. An economic downturn or serious problem could impact both their business and personal finances until things get back on track.
It’s easy to talk about setting funds aside for a rainy day but it takes a concerted effort to actually get it done. Look at your expenses and see if you can lower them by sharing advertising costs with other businesses, taking advantage of tax deductions and negotiating with suppliers. Save as much as you can and hold onto profits tightly when business is booming rather than trying to expand too fast too soon. Doing so will get you through the lean times. This is especially important if you know your business has seasonal highs and lows.
Don’t put all your rainy day eggs in one basket. Keep some emergency money in a savings account for fast access and invest some so that it grows. Conservative stock market investments and short-term CD’s may both be good choices. You may also wish to secure a line of credit when business is booming so you have a little extra wiggle room later if you need it. It’s wise to invest some of your money in places where it will grow but don’t have it so bound up that you can’t liquefy investments quickly when you need cash.