Running a business such as an auto shop as an entrepreneur can be difficult. There are many hurdles you will run into, including financial challenges. Unfortunately, most companies usually close when they run into this problem. That is why you will find more than half of startups do not make it past the five-year mark. But that doesn’t have to be your auto shop. How you handle financial challenges will determine the success of your business. Read on to find out a few ways you can address financial issues at your auto shop.
Prioritize Debt Repayment
When you have your own business, consider your options for financial help. Business loans can be brilliant solutions for prioritizing debt and having the funds your company needs to thrive. Having debts are often why most companies and entrepreneurs file for bankruptcy. According to legal jobs, individuals file around 97% of bankruptcies, not businesses. But does that mean your business is safe? Not exactly. If your business owes a lot of debts, you may find yourself in this situation. To be safe, develop a debt repayment strategy that includes prioritizing debt. For instance, start by paying secured debts and finish with unsecured debts.
Separate Your Business and Personal Accounts
When starting your auto shop as a new entrepreneur, you may have mixed your personal and business accounts. But this decision can lead to challenges in managing cash flow. For starters, your business needs to be taxed. But when running your business through your personal account, it becomes hard for the IRS to determine if this is a company or a hobby. And when you are audited, they may charge you with tax fraud, which is a Class B misdemeanor. In Texas, if they charge you with a class B misdemeanor, you risk a penalty of 180 days in jail, a $2,000 fine, or both. Aside from that, mixing these accounts can affect your credit score, reducing your chances of getting a loan. Separate these two accounts to understand the money your business is making and using.
Update Your Books on Time
One reason your auto shop may run into challenges is that you made a financial decision without understanding your finances. Maybe you bought a company car without knowing if you have enough cash to meet expenses like payroll and rent. Bookkeeping needs to be done every month. If you are unaware of how the business did in June, how can you make financial decisions for July? Always update your books, so you should decide from an informed point of view. If you have too many things in your hand, outsource an accountant’s help.
Hire Skilled Mechanics and Work to Maintain Them
One issue that can drain a business financially is bringing in new people and training them. And if you cannot keep talent, keep spending money on hiring and training new people. Instead, try to hire the best talent out there. Your business’s success depends on your abilities as an entrepreneur but also depends on your employees’ skill set. If they are talented, they will do a good job, bringing in more customers. Independent auto repair shops perform about 75% of aftermarket auto repair and maintenance, which means you have a vast pool of customers to attract. You only need to ensure that the people you hire have the experience to provide excellent services.
Protect Yourself With Business Insurance
Insurance will protect your business if you face a crisis like theft or fire. If people break into your business today and steal inventory or equipment, you will have to replace these things. Those are expenses you had not planned for. Insurance covers these costs, protecting your business’s finances.
As an entrepreneur, you can expect financial challenges along the way. And unfortunately, you will not encounter them once. But if you know how to handle these challenges, it will be easy to overcome them.