It is rare indeed for a first-year business to produce a consistent level of revenue each month. Even if you have a cash retail business, there are ups and downs. And if you’re a consultant like me, not all your clients may pay on time according to agreed-upon terms. It’s enough to make a new entrepreneur wonder whether the whole venture was a good idea.
You should not gauge your business’ success on monthly terms. You’ll find that quarters average out more reliably than months. But months matter. You do have to pay monthly bills such as rent, phones, Internet, and other services, whether or not it is a good revenue month. So how do you deal with income inconsistency?
Business Week Online offers several tips on navigating an unpredictable cash flow:
- Market, market, market. Several hours every week should be spent identifying potential new clients and new work from past clients and then making contacts to build future business.
- Concentrate on the numbers. Figure out how much you will bring in over the year and then create a budget based on your annual needs. It is bad business sense to focus solely on how much money is coming in when times are good. You have to build reserves, just like any business, for the times when cash flow is light.
I agree with those and add a tip of my own:
Talk with your banker about a line of credit. If you have some equity in your home, a Home Equity line of credit may be relatively easy to get. But I caution you: Only take out a credit line for the amount of several months’ expenses, and save it strictly for emergencies.