|
Ask Jane Applegate
|
 |
August 25, 1999: 1:06 p.m. ET
What do you do when revenue is great but it still won't cover all the bills?
|
NEW YORK (CNNfn) - Dear Jane: I own an auto repair business in Pennsylvania that grosses about $600,000 a year. We are very busy, but our taxes and insurance costs are so high, I'm ready to close the doors. We never seem to have enough money to pay our bills. Help!
It's time for you to sit down with an outside expert and take a really close look at your business expenses and cash flow. I know you are busy running your business, but at least twice a year, give your business a detailed review.
Pick a current month and review all your receipts carefully. Make sure your employees are charging the right prices for your parts and services. It may be time to increase your prices, especially if you're paying more for the automotive parts you buy.
If you need to hire new workers, look into state and federal tax incentives available for training workers or hiring welfare recipients.
Review all your fixed expenses such as rent, utilities, phone, office supplies, shipping, etc.
Spend some time investigating ways to cut costs. For example, if you rely on a private overnight shipping service, consider using the U.S. Postal Service. You can save hundreds of dollars a year using Priority or Express Mail, vs. the competition.
Work with an independent insurance agent to review all your insurance bills. You may be able to reduce costs by buying insurance through a trade association or business organization.
If your workplace safety record is strong, you may be able to cut workers compensation insurance costs. If you have vehicles, consider raising the deductibles to save money on the premiums.
As far as high taxes are concerned, Congress is working on some major tax cuts that really would benefit America's small business owners. One provision would allow small companies to deduct 100 percent of their health insurance premium costs, just like big companies do. Keep an eye on Washington, D.C., for the final tax package when it's signed by President Clinton.
Dangers of expanding too soon
I have been in business for two years on a small scale. I keep expenses low and net about $70,000 profit a year. I would like to expand and because of my good credit, banks are willing to lend me as much as I want. My wife doesn't want me to risk what I have. What happens if my expansion fails?
Your wife is right to worry about expanding too fast. Too many business owners take risks without doing enough homework. So, before you borrow a dime, create a detailed business plan, outlining exactly how you intend to spend the money and how you expect to repay it.
Figure out how you plan to market your products or services to bring in the added sales.
Most bankers require at least two sources of repayment before they will make a loan. Cash flow is one source, so you'll need another to make sure your wife and your banker can sleep well at night.
With the borrowed funds, start out slowly. You don't have to double the size of your business overnight. Invest prudently in new equipment or supplies, hire some help and expand in a conservative manner.
Be sure to test every marketing program you try. Quickly drop what isn't bringing in results and try something else. 
|
|
|
|
|
|
JaneApplegate.com
|
Note: Pages will open in a new browser window
External sites are not endorsed by CNNmoney
|
|
|
|
 |
|
