Many small business owners are drawn to the entrepreneurial life by a desire for independence or an idea for something they want to offer to the world. However, if you're going to make a living through your small or medium enterprise (SME), you need to ensure your passion is also profitable.
It starts with understanding your business model. In a nutshell, this simply entails knowing your strategy for making money, taking into consideration your identity, assets and industry. In other words, how does your cash flow work? In what ways are funds coming in and leaving?
At a basic level, business models can be sorted into several types, such as:
- Manufacturers create goods, products or services.
- Distributors sell products or services, including at wholesale.
- Retailers purchase from distributors and sell to consumers.
- Brokers serve as the middle man and charge fees to introduce buyers to sellers that can supply what they need.
- Landlords or lenders charge consumers for the use of their goods or services.
From here, you can further refine your business model based on factors such as whether you're operating online, in a brick-and-mortar location or both. You'll also figure in the types of assets you handle and how you manage your customer base. For instance, do you deal with perishables or seasonal goods? Will you leverage online auctions or have a set fee for your products? Evaluating elements like these gives you insight into the consistency of your cash flow, how your incoming funds align with billing cycles and more.
Once you have an understanding of how your business generates revenue and establish a plan for making a profit, you can take advantage of accounting software for small businesses. Programs such as CashManager by Accomplish enable you to sort out the details and keep an eye on your progress.