Get ready to look closely at your balance sheet, assess your business operations and make the changes you need to become profitable!
Many small business owners don’t know the difference between ‘busy’ and ‘profitable’. They are chasing payroll money every month, they’re getting deeper into debt, and if they happen to have one or two months of delayed receivables, they find themselves in a very precarious situation.
I know that it might be the least appealing part of business planning for most, but having an up-to-date balance sheet and keeping the cash flowing is by far the most important thing for your business to thrive.
Cash flow is the lifeblood of a small business. If you run out of cash before you can create a steady income, it’s game over. It’s a hard lesson to swallow; you’ll be financially and emotionally devastated.
So, your aim this year should be to grow into a seasoned, successful business owner, by gaining financial and operational insights, so your business balance sheet is always positive. Just like the old adage goes – awareness is 90% of the solution, and clarity leads to resolve.
So, let’s not waste any more time, and let’s start your business scorecard.
Assess you requirements.
Everyone knows that when travelling you need to bring half as many clothes and twice as much money. When growing a business, plan for twice as much time, and twice as much money too!
Everything takes longer in the trenches than it appears to in the planning stages. There are also costs you can’t pre-empt until you actually start operating (such as license, office rent or payroll).
So, assess all your requirements and put on paper all numbers. You don’t want to run out of money in the midst of things.
Packing in the payroll.
Payroll is one of your largest expenses when you have staff. As a small business owner you become the lowest-paid person at your company. I’m pretty sure living on minimum wage wasn’t what you had in mind when you started your business.
When you grow your team, be very clear on the roles and responsibilities of each position, on the tasks each person needs to accomplish, and how each member of the team contributes to the bottom line. As a small business you can’t afford an extra pair of hands, just in case you get more business in. You need just the right team and the right skills in place.
Spend money wisely.
It’s nice to have new shiny things, like fashionable desks and sofas handpicked by an interior designer, or an Italian coffee machine that has the range of a barista. But, when you’re using your savings or going into debt to launch a business, being frugal will help you reach a positive cash flow much more quickly. So, beware of going too large! Your dreams and ambition may be sometimes bigger than your resources. Be wise and set yourself up for success by distinguishing between what’s necessary and what can wait for another 1 or 2 years. Learn to prioritize and invest in the things that are needed to create a pleasant work place, as well as a nice experience for your clients, and simply forgo the other things.
Boost profits by bringing in more revenue.
If you don’t have enough retainer clients, long term contracts or regular sales order in place, your revenue stream is constantly fluctuating, because you need a constant stream of new clients coming in, plus you also lack the time, and possibly the focus, to market yourself. This sort of business operation is more likely to lead to stress and struggle. What can you do? Try cross-selling products or services that are complementary to what you already offer. Or introduce monthly or yearly service plans, or bundle services that have a discount. This way you can boost the cash flow and get your revenue up. The new operative words in your company should be: selling, marketing, networking and cutting costs.
Even if you’re losing money, if you have a clear plan mapped out for this year, and you keep an updated balance sheet, there’s always a way out. You can look at ways to cut administrative and operational costs, and use your resourcefulness to improve your bottom line. You can absolutely change things and turn your business profitable.