We have talked about this before. In fact, we would say we have almost talked it to death if it were not so important. Know your business and how your cash flow operates within it. If you have seasonal fluxes of cash, prepare accordingly. Do not blindly spend while you have money coming in, only to be strapped for cash later during your slow season. Part of this means having accurate financials on-hand to really understand your free cash flow. Any predictable income is vital when strategizing your financial goals.
Have a Back-Up Plan
Every budget should include a cash cushion. Maybe you will have an unexpectedly large tax bill or an operational emergency. What would you do if your landlord suddenly sold your space? Do you have a safety net to find a new space to buy or lease for potentially more than you are paying now? We have even seen businesses find themselves in hot water when their industry peers suddenly dropped prices and they were not prepared to keep up with the change in market price temporarily while they performed a price analysis. When building your contingency budget, also remember to take into consideration any previous expenses that had large variances.
Arm Yourself with a Team of Experts
Save yourself the time (time = money, remember?), and look to hire a CFO or outsource your accounting. Yes, you could consider this a self-plug, but if you do not understand the numbers, then how are you supposed to improve on them? If you are not an accountant, why take up ample amounts of your time trying to right the balance sheet and trying to rework statements. Your financial expert should even be able to create your contingency budget and monitor the ebb and flow of your cash to ensure you can always meet your financial goals.
Set One Specific Financial Goal Each Fiscal Year
Having sales targets is great, but crafting one definitive goal for each year will set yourself up for an ambitious year. Every year. Maybe it is to increase your safety net we mentioned above. Or maybe this is the year you are going to pay off your business loan completely – or a portion of it. It is never a bad idea to define your investment objectives. Mark Suster, an entrepreneur and venture capitalist, recently wrote this good reminder about profit versus growth and Amazon, who may show an unimpressive profit, but they are reinvesting a TON in growth and acquisitions. That said, the goals do not have to be huge. They just need to exist.
Curate a Culture for Growth
Remember to loop your team in on the financial goals each year. Better yet, include them in the planning by providing them with a road map and updating them quarterly. Your staff will be more likely to buy into that vision, which creates a common purpose and a culture for growth. If you offer incentives, remember to connect them directly to your fiscal objectives. Whatever you and your accounting team determine to be your financial goals for the year, remember that keeping overhead low is just one small piece to helping your business scale. And should your goals involve finding investors, stay tuned for our upcoming blog about preparing for fundraising.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
