How to Set up Your Small Business for Success in the New Year

It’s a new year, but many of the challenges of 2020 are still with us. Rather than the fresh start that many hope for each January, small business owners are instead carrying over financial problems brought on by the pandemic. Old and new businesses alike are discouraged by the difficult task of staying afloat in economic instability.

There’s good news, though. While financial security during a pandemic sounds contradictory, there are steps that your small business can take to position your company for success. If you are adaptable and prepared, your business will have a much better chance of shouldering unforeseen challenges ahead — during COVID-19 and beyond. Read on for our best tips and tricks on how to set up your small business for success in the new year.

The Future Is Online

We’ll start with the basics. Everyone’s online nowadays — you’ve got the website, you have a Facebook page. But that doesn’t necessarily mean you’re using your digital platform to its full potential. If you’re not yet investing in and expanding your online presence, take this as a sign.

Even before COVID-19 arrived, the world was already moving toward a digital-first approach. Consumers want digital options, especially if visiting brick-and-mortar locations is off the table. Don’t scare off potential customers with a lack of technological solutions. Instead, you can use this as an opportunity to expand your audience reach through your online presence.

Start Transitioning

If you haven’t already, it’s time to make the transition to online transactions. That means building up your website to enable ecommerce or allowing for mobile commerce. It also means switching to online, contactless payment at your physical locations, so that customers who are able to visit your shops feel safe. If physical location isn’t a necessity for you, you may consider reducing expenses by going fully online — and cutting out the overhead costs of rent, utilities, and maintenance.

Seal the deal with an online bank and download their mobile app to make it easier to manage your funds wherever you are. You will want to deposit checks or set up auto payments, view your account balances, and manage incoming payments all online. This will not only free up your time to dedicate it where it matters, but banks such as Axos also offer a suite of digital tools that can help in areas like ACH payment acceptance or mobile commerce. As your company moves to a more digital-forward approach, so should your financial management.

Play It Safe

Emergency funds aren’t just for individuals — businesses need them too!

It may seem obvious, but when the going gets rough (like, say, a pandemic), you’re going to need something to fall back on. That’s where emergency funds come in. Keep a cache of emergency funds equal to about 3-6 months of operating expenses (or 10%-30% of annual revenue,) and put that money in a high-yield savings account to generate interest. It’s okay if you don’t have it all on hand at once (especially if your business is just getting started). Set up an auto deposit of x dollars a week into this separate fund and your savings will add up over time.

Be careful where you put that money, though; don’t make the mistake of locking it all away in certificate of deposits (CDs) where you can’t reach it without a fee. Remember: this will be your stash for when things hit rock bottom to help you stay afloat. High-yield savings accounts tend to be a better option, but you’ll need to do some research to find one that’s best suited to your business. Keep in mind factors such as monthly maintenance fees, deposit requirements, and average daily balance requirements.

Understanding Annual Percentage Yield (APY)

Part of picking an account means understanding the importance of a high Annual Percentage Yield (APY). Due to economic instability, there have been federal rate cuts nationwide. As of February 4th, 2021, the national average of Annual Percentage Yield currently sits at 0.05% (which is as low as it sounds), but that doesn’t mean you shouldn’t invest your money. In many cases, any interest is better than none.

Thankfully, the national average is typically way below what the top banks offer. And if you’re looking for the best deal out there, you’ll want to turn your attention to online banks. Because digital banks don’t have to pay overhead for physical branches like their brick-and-mortar counterparts, they have lower minimum balance requirements, little to no monthly fees, and can often challenge the APY rates of traditional banks.

Take the time to shop around. If you’re not sure where to begin, start by exploring our high-yield reserve accounts.

Set up a Small Business Checking Account

Opening a small business checking account can help you on the road to financial success. If you’ve yet to make the switch over from personal funds, or if you need an account better suited to your business needs, then it’s time to look into business checking.

First, you need to map out your cash flow predictions for the next 12 months. This will help you figure out the answers to these key questions:

• Can you afford monthly payments?
• Can you meet minimum deposit requirements?
• What kind of interest rates would you benefit from?

Use the data to pick an account that will help your business, not hinder it. If you’re going to be tight for cash the next six months, for instance, don’t pick an account that requires monthly payments. Once you know the answers to those questions, compare checking accounts to see which is best suited for your needs. Here are some common features that you may want to compare.

Axos Bank offers small business owners a variety of checking options. From the essential Basic Business Checking to our Business Interest Checking, you can earn interest on your money — and gain a dedicated Relationship Manager who will help you manage your finances.

Adapt, Don’t Resist

The best advice at the end of the day is to stay flexible and to learn how to innovate. Once you have the financial side of your business figured out — and you are monetarily prepared for any road bumps — adapting to unanticipated changes will be much easier. Staying ahead of the curve and pioneering solutions to problems is the key to a successful business — in hard times and prosperous ones alike.

Axos Bank has been supporting small businesses through the ups and downs of growth for over 20 years. Come join the movement and bank online with our team.

¹Includes debits, credits, or deposited items. $0.30 per item thereafter.

²Includes debits, credits, or deposited items. $0.50 per item thereafter.

How to Set up Your Small Business for Success in the New Year

This blog post was published by Axos Bank on February 25, 2021 and last updated on February 25, 2021.