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Four Steps to Get Your Business Out of Debt


Whether you’re a solo entrepreneur or in charge of a larger company, you know that debt is a necessary part of running a business. But if you feel that your company is carrying on too much debt, the Black Business Associationshares four steps you can take to pay it down or even pay it off faster.


Keep Track of Your Budget


Whether you’re just launching your business or you’ve been at it for a while, it is very important to have a budget in place. So keep track of all your expenses over a period of several months and see how much revenue you’re generating. This will help you identify which parts of your business are making money and which areas aren’t profitable enough.


If you’re just launching your own company and are unsure of what structure is best, consider forming an LLC, or Limited Liability Company. It will not only help you establish credibility as a business, but it will also shield you from personal liability. Another advantage of forming an LLC in Kentucky is that it will allow you to use pass-through taxation: Instead of being taxed multiple times, your business income is only taxed once, leaving more money into your company’s coffers.


It can be intimidating for new entrepreneurs to tackle matters of business formation and taxation, which is why many choose to work with a formation service. Formation services are usually much cheaper than hiring a lawyer, so they are an ideal choice for small businesses. Each state has its own rules and regulations for forming an LLC, and a formation service will help you navigate those waters.


Reduce Your Expenses


A good way to get your business out of debt is to reduce your expenses. Here again, you will need to identify necessary expenses versus expenses that can be negotiated down or even eliminated altogether. Once you’ve identified what business expenses cannot be reduced, such as rent, payroll taxes, and employees’ pay, it’s time to tackle the things you spend money on and see how much value they bring to your business. Shop around for cheaper suppliers or for cheaper health benefits. Maybe you have some monthly fees for memberships or services you barely use; cancel those subscriptions that take a bite out of your profits.


Increase Your Revenue


Now that you’ve identified which parts of your business are the most profitable, it’s time to focus on increasing sales or revenue. There are two main ways to achieve that goal: by increasing your customer base, or by providing more goods or services to your current clients. Increasing your customer base can be done with a direct marketing campaign, where you will reach potential clients via TV ads, radio ads, bulk mail or email, or with an indirect marketing campaign using tactics such as search engine optimization (SEO). If you want to offer more to your existing customer base, consider adding upgrades to your services or new merchandise that you can promote to them, but make sure you avoid being too “pushy”.


Consolidate Your Debt


If your business has had to deal with unexpected expenses, if your cash flow hasn’t been consistent or if you had to invest in new equipment, you might have had to take out a few loans to stay afloat. Business debt consolidation allows you to take out a new loan to pay off your existing debt. Having only one loan payment to manage each month will make things easier and cheaper, especially if you can qualify for a low interest rate.


But consolidating your debt won’t help if your business is still spending more money than it generates, so take advantage of other resources that provide help to entrepreneurs like you: reach out to the Small Business Development Center, the Women’s Business Center, Veterans Business Outreach Center, or your local Chamber of Commerce, and see if you can find a mentor that will guide you through your entrepreneurial journey.


Getting your business out of debt can be achieved by taking stock of your expenses, identifying potential savings, growing your customer base, and reaching out to financial experts.


Keep Track of Your Budget


Whether you’re just launching your business or you’ve been at it for a while, it is very important to have a budget in place. So keep track of all your expenses over a period of several months and see how much revenue you’re generating. This will help you identify which parts of your business are making money and which areas aren’t profitable enough.


By Brittany Fisher from Financially Well


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