Optimization From The Beginning
You’re going to have unexpected expenses everywhere you go in business. The best way to get around them is to plan for the “Factor X”, and to optimize your operations so that you can properly deal with such situations when they arise.
First you’re going to want to determine whether your business requires additional property outside your existing means, or not. Some startups can do fine from the basement of the owner’s primary residence for several years before they need to outsource to an office, or acquire a building. Some businesses need property immediately.
One thing to consider is that rental property equates to lost money at regular intervals. If you’re paying $3k per month for office space downtown—and that’s a conservative estimate even for an SMB—you’re spending $36k a year that will never come back to you. In five years, you’ve spent $180,000.
Meanwhile, if you build your own property a little out of town going the prefab route, you can get a bigger building for much less money. You can build a prefabricated unit for between $16 and $50 per square foot, if you’re savvy. That means at the high rate, you’ve got a 2,000 square foot building for $100k. That’s less than three years’ rent at the numbers supposed here.
Doubling Down On Property
Additionally, you can increase the value of your property during the building process with tax breaks and cost-effective additions. Green solutions are a great way to simultaneously save money and upgrade the value of your property. You kill the cost of electric utility, the government issues you a tax break, and a 5.1 kWh system can bring $15k to $20k in value to your property.
Additionally, such a system can be installed for around $5k, if you buy the right panels, connective equipment, and batteries. Additionally, you’ll likely want to install it yourself.
Two systems like that could turn a $100k building into one worth $130k to $140k. If things go rough in the first five years, you can sell the building and have four years’ rent for a new office immediately.
Something else worth thinking about is that you’re going to want to have solutions in place for when clients don’t pay debts they owe you. You’re going to have situations where that happens statistically regularly. Just because someone owes you $5k by April 15th doesn’t mean you’ll get your money by then, or even by year’s end.
A good rule of thumb is to keep a Factor X fund around, as mentioned earlier. But another strategy is to work with a trusted loan agency. If you’re looking for loans to help your small business get off the ground, smallbusinessloans.co offers ones for most business needs.
Additional Reasons To Secure Small Business Loans
You may additionally need loans for expansion, for upgrade, for marketing purposes, or any of a dozen little things that may unexpectedly crop up. Many businesses continue to go into debt for short periods of time even after they’ve become successful. Consider a sporting goods store grown large enough for a location expansion.
The expansion costs 30% more than yearly revenue from the primary. After a loan gets their new building built, they’ve doubled revenue, the loan is paid off, and the business can expand.
Again, many of these situations have a hypothetical nature to them, but the truth is you will encounter similar scenarios as you go about establishing your SMB. The hope is to get into that high-dollar range eventually. Sometimes you’ve got to spend money to make money for that to happen; but if you plan for it in advance, you will be able to meet your goals.
