While growth can be hard to come by in the current challenging economic times, a budget will quickly show you where you can improve your business. Use your budget to set specific goals and then monitor your performance against your forecast.
Focus on incresing profits
The key is to centre your financial strategy on increasing profits, not just sales. Both growing existing accounts and attracting new customers bring the greatest results, particularly if most of your expenses are fixed and can't be lowered. That said, you should always be looking for ways to reduce your costs.
1. It's all in the planning
Difficult and irregular economic conditions and the rising cost of doing business are two of the main challenges small businesses face when trying to grow their business.
A solid and realistic plan is the best way to combat uncertainty and build growth sustainably. List your main challenges or barriers to growth and then of two or three ways to address or overcome each of them. Remember, forewarned is forearmed.
2. Be conservative in your budgeting
An optimistic nature is important in business - except when budgeting. However, overly optimistic forecasting is the fastest way to knock your budget and business off track.
Be conservative with your sales and revenue projections and over-estimate your expenses. This padding will go a long way to meeting the true figures each month, and will help to keep your business afloat during slow months.
3. Using your own funds in a crisis
Many small business owners use personal or private funds when they are cash strapped, or when an unexpected expense arises.
Investing your own money in your business is the natural and probably fastest and easiest option in tough times (for some, it might be the only option). But make sure you minimise your personal exposure, and when the cash is flowing through the company again, recoup those personal funds immediately.
4. Have various sources of funding readily available
You might not need any external finance in the foreseeable future, but a wise business owner lines up a number finance options, just in case.
Arrange the sources to match the possible uses to ensure you're not paying too much for the money you need. Use short-term financing options such as lines of credit, short-term loans or credit cards for short-term cash needs, and long-term or secured loans only for long-term investments.
Also try to keep at least three to six months' working cash in reserve. If you don't already have this, start looking at your budget to see how you can start to build up savings. Ask your accountant for assistance.
Develop your financial roadmap
By their very nature, small businesses have the agility and flexibility to be proactive in their budgeting for the year ahead.
Think of your budget as a road map to a successful year, with large signposts along the way to make sure you're on the right track.
If you have deviated and find that you have slowed right down or are going down a dead end, it's relatively easy to retrace your steps to find out where you took a wrong turn.