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Many event business owners hand their financials over to their accountant or bookkeeper, but a strong understanding of how to protect your company’s financials is crucial for success and futureproofing your business.
This week’s Smarticle will introduce several important tips for proper financial planning.
Cash flow is king
- You can lose money on your profit and loss statement and still have the potential to turn your business around, but if you run out of cash, it’s over
- Have a cash cushion of at least three to six months operating expenses to ensure you have enough money if any surprises come up
Negotiate with the bank for credit when your finances are good
- Establish a solid credit history and relationship with your bank early on
- If you have a good year, negotiate for credit from your bank, even if you don’t need it in that particular moment
- Go to small banks or banks where you have a pre-existing relationship
- Get to know your branch manager
Have a contingency plan for challenging scenarios
- What will you do if you lost your biggest client?
- What will you do if there’s a significant act of god that puts events on hold for a long period of time?
- What will you do if your top event producer leaves and clients no longer want to work with your business?
Have a rainy-day plan for what expenses you will cut and ideas for new sources of revenue
- The better you plan in advance, the more elbow room you have to turn things around in a bad situation