Financial well-being June 9, 2023 By
Which is more important, strengthening your business finances or growing your business? The answer is often both.
Using business funds efficiently is key to success for any business, but especially for smaller companies, which usually have less of a financial cushion to fall back on if needed. To support your business’s performance, you’ll need to take a high-level view of your financial activity – including all revenue streams, operating expenses, and cash reserves. Once you’ve got a handle on the financials, you’ll need make some plans to help your business grow.
By examining how each of these factors contributes to your overall financial picture, you’ll be in a better position to grow your revenue, streamline your operations, and advance your long-term strategy.
3 Strategies to Improve Your Business Financials
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Revenue
It’s essential to understand how much income you need to stay afloat, how much more you need to grow, and how you can enhance or add to your current revenue stream.
Perform a break-even analysis to get a better picture of your business’s profitability, then review your revenue drivers to see where you can make improvements – such as by shifting sales priorities, adding or discontinuing products or service lines, entering new markets, or adjusting prices. If your strategy to boost revenue comes with an upfront cost, it may be time to explore financing options to help you pursue your growth objectives while protecting your cash flow.
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Expenditures
Even if your business is unable to increase revenue in the short term, you can still improve your profitability by trimming labor and production costs. Because a business’s largest recurring expenses are usually staff-related – such as salaries, payroll taxes, and benefits – the best starting point when looking for new cost efficiencies is to review the productivity of your personnel.
Consider increasing training to make your staff more versatile or improving existing workflows. Sometimes, spending money on facility upgrades or new technology can lead to process improvements that give you a good return on investment.
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Efficiency
Look at your budget and monthly expenses to see where your funds are going, then think about how each area contributes to your bottom line, either directly or indirectly.
If the costs associated with your facilities, equipment, marketing efforts, vendor relationships, vehicle fleet, or other budget items are disproportionately high, look for ways to get more value out of this expense or find ways to scale back, such as by selling underused company assets or switching to vendors or services that offer greater value.
4 Ways to Grow Your Business
You’ve strengthened your financial position. And you know that managing your business efficiently and eliminating wasteful spending is critical when times are lean, but that it should remain a priority during periods of prosperity as well. Keeping your business growing should be a year-round focus. Here are four strategies to set you up for success.
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Clearly Differentiate Your Business
Identify what makes your company’s brand unique, and make sure this is clear in the minds of your customers.
Does your company distinguish itself through superior customer service? Make sure you have a REAL person answering calls instead of sending your customers through a meandering phone tree.
Does your organization add more value to the customer than your competitors do? Empower your employees to delight and surprise customers in the moment without having to go through bureaucracy for approval.
Does your brand have a sense of humor? A memorable mascot will keep your business top of mind when customers are researching your industry (think the Geico Gecko®).
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Narrow Your Focus When Necessary
Have you directed your team to expand business efforts to the widest possible market during slow periods (such as the long, hot days of summer), assuming the numbers game will work in your favor? It probably won’t.
Instead, identify which of your prospective buyers need your company’s products or services the most right now and have your team focus only on those opportunities. Then you will increase your odds of getting the right product to the right customer at the right time. Adjusting your sales efforts based on a well-thought-out strategy will take you further than blind luck.
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Delegate!
You are only one person and can’t possibly wear every hat all the time. To grow your business, you must invest in people to do the tasks that you don’t have the time to oversee. It’s a misconception to think that it is cost-effective to manage everything yourself. Lost production and missed opportunities will cost you much more.
Build a team you can trust. Then trust them.
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Invest in Technology
Upgraded technology is often the engine that drives business growth. Enhanced automation will increase productivity and provide better insights, which ultimately helps you and your team to work smarter, not harder. Investment in the right technology can save money in the long run by removing some manual tasks and standardizing work processes, which may reduce both the number of errors made and the amount of time it takes to complete tasks across the organization.
Help Your Business Thrive
Growing your small business will take time and energy, but a trusted and experienced small business banking partner can help you reach your goals. For personalized advice, consult your financial institution today. Call your commercial banker to sit down and look at ways you can improve key financial metrics.
