Managing a small business is not easy. Without the resources that large corporations have come to rely on to make business run smoothly (think HR departments, finance, legal, etc.), it can be difficult to learn how to start and manage a small business. Between incorporating, hiring, firing, and learning how to manage a small business budget, entrepreneurs have their hands full with just the basics of how to manage a small business effectively.
Here, we’ll share all the best tips and tricks to teach every entrepreneur how to start, finance and manage your own business.
How Do You Manage a Small Business?
1. Take care of your mental health
It might seem like a strange place to start when talking about how to manage a small business effectively, but it’s the foundation of starting a small business. Starting and managing a small business can take a toll on business owners’ mental health. It’s important that entrepreneurs take care of themselves through the process. Reserve time to decompress. Whether it’s meditation or yoga or simply going for a walk and listening to a podcast, taking “time off” is an incredibly important part of managing a small business effectively.
The other key is to try to adopt some level of flexibility. Your business may not turn out exactly the way you envisioned. Give your business room to pivot and adapt to whatever trends you’re seeing in the market.
2. Find the right setup
While there’s a lot that comes with managing a small business, it’s important to start with the basics. A clear vision or business purpose will help you get started and define a clear path for your entrepreneurial journey. Do some market research. Make sure your small business can meet a need in the market and that there is significant demand for your product or service. Once you’ve established the need, you can incorporate or set up a separate business LLC. The key here is to make sure that your business is a separate taxable entity — even if you’re the only employee.
Separating your small business from your personal assets is more of a safety net than anything. This way, your personal assets will be protected should your small business run into financial or legal issues.
How to Manage Accounting for a Small Business
3. Separate business from pleasure
Speaking of protecting your personal assets, even if you don’t incorporate or set up a separate LLC, you should separate your business financials from your personal financials. Open a business-only bank account and sign up for a credit card that you’ll use only for business expenses. This will make your life a lot easier as you’re figuring out the best way to manage receipts and how to manage taxes for a small business.
BMO offers a wealth of financial resources for aspiring entrepreneurs. Visit our business banking centre to determine which account is right for you.
4. Hire a professional
Another practice that will make your life a lot easier come tax time is working with a bookkeeper. While this isn’t always an expense that small business owners can afford, it will give entrepreneurs peace of mind that their finances are being managed correctly. A bookkeeper can help business owners manage money in a small business and manage taxes and payroll.
You’ll also want to have an accountant on your roster of professionals, especially at tax time. Unlike a bookkeeper, an accountant can provide advice on the best ways to manage your finances, along with tips and tricks for optimizing your taxes. A good accountant will make suggestions as your business grows to help manage cash flow.
5. Lean on technology
If you can’t swing the costs of a bookkeeper, try your hand at doing your own bookkeeping. There are many accounting apps that can help business owners manage expenses and keep finances in check. Two popular software programs to consider are Freshbooks and Quickbooks. (More on those below.)
6. Pay the tax man
Another key to managing accounting for a small business is to always pay your taxes. Be aware of your tax payment schedule and how much you’re likely to owe. An unexpected tax payment can cause financial ruin for a small business. It’s incredibly important to always manage cash flow and know when (and how much) you’re expected to pay.
How to Manage Employees in a Small Business
One of the most difficult aspects of managing a small business is managing employees. What likely started as a one-person operation (or maybe a few people if you have partners) will, if successful, need to expand beyond the founding team. As your small business grows, you’ll need help. Hiring can be challenging for a small business, as managing employees requires both time and money. However, by following a few simple rules, you can make both investments worth your while.
7. Hire smart
Almost every successful business leader agrees on one thing: hire people who are smarter than you. Most business owners know that their employees are their strongest asset and that hiring those with differing perspectives (but not opposing philosophies) will increase the likelihood of success. A key component to managing employees in a small business is to hire slow, but fire fast. Take your time in the interview process and truly figure out who will help push your business forward. The same does not apply for letting employees go. If you think you’ve made a hiring mistake, act quickly to rectify it. An employee with a negative attitude or poor work ethic can sink a small business fast.
8. Train your employees well
When you do find the right hire, make sure you take the time to train them well — and then back off. Give them the skills they need to succeed in their role and the information to make wise business decisions. Every employee you bring on board should make it easier to manage your small business, which means giving them the space to do that. You can still be there to lend an ear or a helping hand. It’s also important to lead by example when training your employees. Create a culture you’re proud of and make your business a place people want to work. It’ll help you attract top talent without the deep pockets of some of the bigger players. Show new hires that their mental health is important and that you value work-life balance.
How to Manage Growth in a Small Business
Growth is an inevitable part of managing a successful small business, but it can be hard to navigate when it comes. There’s usually a need for extra help before the revenue is there to support hiring additional team members. Maybe you need capital to manufacture a certain product before you’re able to sell it. The key is to learn how to manage cash flow and how to manage expenses.
9. Lean on consultants/contractors
As a small business grows, it can be hard to manage finances, especially when it comes to hiring new employees. An annual salary is a big commitment, not to mention health benefits, office space and pricey devices. It can be even more expensive if that employee doesn’t work out. The good news is that small businesses can lean on contractors and consultants to bridge the gap. Hiring someone on an hourly or part-time basis is a much smaller financial commitment. This will help business owners learn exactly what their small business needs when it comes to staffing. In this gig economy, it’s easy to find contractors in almost all sectors, including marketing, HR, IT and accounting.
10. Control costs
The most challenging part of managing growth in a small business is controlling costs. Expand too quickly and your costs will outweigh your revenue, but grow too slowly and you won’t have the bandwidth to deliver on that increased revenue. It’s a dicey dance that business owners are forced into as their business sees success. Before making any changes or investments, do a deep dive into revenue to really understand the areas of growth. Is this a seasonal increase? A one-time increase? Is this a pattern you can expect to continue? Figure out which areas of your business are growing and what kind of resources you need to continue that growth trajectory. You’ll then know where to invest.
Best Apps and Tools to Manage a Small Business
In today’s post-pandemic world, tools and apps have become even more important when it comes to managing a small business effectively. Each one of these apps and tools will help businesses stay on track no matter where their team members are located.
11. Use accounting apps
Freshbooks is one of the most popular accounting tools among small business owners for managing budgets, finances, cash flow and payroll. The software allows entrepreneurs to easily manage finances. This includes tracking invoices, payments, employees’ time and payroll.
Much like Freshbooks, Quickbooks offers an affordable option to help business owners manage a small business budget. Its easy-to-use design will help monitor revenue and taxes, and also offers a secure backup service which will keep all your financials safe should you lose or break a device.
Like Freshbooks and Quickbooks, Wave is one of the best apps to manage small business finances. But unlike the other two, access to basic Wave is free. Basic Wave also includes Wave invoicing and Receipts by Wave. The web-based accounting software offers two optional paid add-ons — Payments by Wave and Wave Payroll — which can help manage payroll and allows businesses to securely accept online payments. One of the largest downfalls of using Wave to manage small business finances is it has limited functionality to manage taxes.
If you’re looking for ways to accept on-site payment, Square is the app for you. It allows businesses to accept payment via mobile device by sliding credit cards through the Square Reader attachment. In recent years, the tech company has expanded to offer business owners additional tools to help manage payroll (via Square Payroll), gift card sales, and appointment bookings.
Keeping work-related expenses organized is one of the most challenging aspects of running a business. It can be hard to figure out how to manage expenses for a small business, but that’s where Expensify comes in. The app allows business owners to cross-reference work calendars with expenses, gives users an easy way to file and manage receipts, and offers automated reports and direct deposit reimbursements.
12. Communicate efficiently with your team
One of the most popular online communication tools, Slack cuts down on emails and allows remote teams to stay in touch via direct messages, channel messages, group messages, video and audio calls. It also offers several app integrations (calendar, Google Docs, etc.) which helps keep everyone on track. The company offers a free basic account (great to manage cash flow) along with upgraded accounts that offer premium features (e.g., allowing guests to communicate on certain channels, creating shared channels with other workspaces, along with group audio and video calls).
A favourite among project managers, Asana helps employees and employers organize projects and tasks. It gives an easy overview of what needs to be done for each project (along with the ability to assign each task to a team member) and sends reminders if someone has a task that’s almost due.
Google Docs + Drive
With most employees working remotely, a centralized in-office storage system is no longer an option. Google has improved its security features, allowing business owners to rest easy knowing their proprietary information is secure. Use the Docs feature to work on projects simultaneously with other team members. Use Drive to store all relevant documents that remote employees may need access to.
13. Talk to your customers
Mailchimp is one of the easiest tools to use for email marketing. Whatever business you’re in, your small business would likely benefit from communicating with your customers. Mailchimp offers helpful data insights, easy-to-build and easy-to-design templates, and a straightforward user interface. The best part is Mailchimp offers its service for free for small businesses sending emails to fewer than 2,000 contacts.
Social media is obviously a huge part of digital marketing in 2020, but managing multiple platforms is a lot for small business owners. Hootsuite connects all your accounts to one centralized dashboard, allowing marketers to communicate on multiple platforms with one click. It also offers data insights to help business owners determine what type of content is resonating with their audience. Marketers can also find suggestions for how to better connect with customers.
Similar to Hootsuite, Buffer offers the same centralized dashboard for social media management. Connect all business accounts to easily communicate with customers and track how they’re responding to your marketing efforts with the platform’s data and analytics.
Starting a small business is definitely overwhelming, and any entrepreneur will tell you that it’ll be an emotional rollercoaster. However, with the right setup, the right team and the right tools, small business owners can find success. The key is to learn from those who came before you and seek out the educational resources that will teach you how to run a small business effectively.
About the Author:
Newsworthy Co. is a woman-owned and operated content development agency, and the creators of The Bullet, a quick shot of daily news. The team brings 20+ years of digital business experience to the creation of branded editorial content (covering everything from fashion to finance). Learn more at wearenewsworthy.ca