When starting and maintaining a successful business venture, there are a variety of evolutionary stages that need to take place. However, one of those stages that never seems to have an end date associated with it is the need to accurately budget and finance the business over time.
The truth is, every business owner, at one point or another, is faced with difficult decisions to make regarding the growth and sustainability of their organization. Many times these decisions have to do with balancing the short-term financial needs of the organization with long-term goals. But these decisions can be difficult to approach without the right strategic planning and foresight.
Small business owners need all the help they can get when it comes to preparing their companies for future success and cutting the excess costs associated with growth. Below, we’ll discuss a variety of budget and finance tips that you can use to help your business thrive in 2020 and beyond.
1) Invest in a Financial Advisor
Regardless of whether you run a brand new company, or have been in business for years, working with a financial advisor can be key to developing a successful business model. Financial advisors offer helpful advice on several money-related issues, ranging from personal and business finances to retirement options, tax returns, and insurance.
An important aspect of a financial advisor’s role is correctly managing the cash flow of a business, keeping an eye on cash and debt levels while reducing financial risks. This gives organizations better insight when planning for growth and helps to create more sustainability longer-term.
Financial advisors can also help you develop longer-term strategies when it comes to product development, inventory management, and market research. The benefit of an advisor is that they help to inform on important decisions “before” they are made, saving an organization from taking expensive detours on their road to success.
The role of a financial advisor can vary widely from one business to the next. Typically, however, organizations will rely on their ability to provide accurate business projections and develop a business plan around them.
2) Capitalize on Green Initiative Tax Credits
The concept of “going green” isn’t a new one for many business owners. For years now, large organizations have been taking a stand and looking for ways to create better efficiencies around their energy consumption and reduce their carbon footprints. In many cases, specific organizations have made significant investments in these initiatives, becoming outstanding ethical examples for other organizations.
A couple of great examples of companies that have prioritized their green initiatives over the years are McDonald’s and Coca-Cola. McDonald’s recently focused their attention on the energy consumption levels of their appliances and transitioned most of their equipment to energy-efficient alternatives. This has cut their energy consumption across all restaurants by nearly 25%. In a similar fashion, Coca-Cola focused on becoming environmentally conscious when they invested in new energy efficiencies, specifically concentrated on how they manage the production and packaging of their cans and bottles.
But preserving the environment is only one of the many benefits businesses can enjoy when they work to reduce their carbon footprint. Small business owners have the opportunity to capitalize on several business energy tax credits. These credits are designed to award businesses that take the initiative to reduce their impact on the environment and help alleviate some of the financial stress in doing so.
3) Utilize Crowdfunding and Angel Investments
Of course, for newly developed or quickly growing companies, no matter how well you budget for your business, it won’t matter unless you’re able to secure some form of funding. But while many owners’ first response is to look towards securing a business loan as a potential solution, in many cases, acquiring funding from a financial institution may prove difficult. This is especially the case with high-risk business models and uncertain success.
Thankfully, there are a variety of methods businesses can use to gain their much-needed funding. Crowdfunding has become a popular alternative to traditional funding and has become especially useful for younger startups with strong marketing prowess. Angel investors and venture capitalist groups are another way small businesses can gain their funding by incentivizing investments with shares in the company or royalty deals.
4) Regularly Audit Your Budgets
Establishing a budget for your business should be one of the first steps you take when building your company. However, many business owners fail to realize just how important it is to not only create but maintain and audit these budgets over time. Aside from the frequency in which you review your budgets, it’s essential to ensure your finances are being looked at with the granularity they deserve. Budget management is another area that can benefit from the involvement of a financial advisor who can help you understand the financial impact of your decisions and establish a reasonable budget to support them.
It’s not enough to simply establish a spending limit at the beginning of your fiscal year. Smart business owners analyze all areas of their spending, including variable business expenses, fixed product and service costs, predictable variable spending, and emergency resources.
Putting all of this together is what makes a reasonable business budget, and businesses must take the time they need to accurately forecast their business needs at the start of their fiscal year. Working with a financial planner to develop an optimal budget is another great way to ensure no critical considerations are missed.
5) Carefully Follow Your Sales Cycle
To effectively budget for your business, you must have a solid understanding of your business’s sales cycle. All companies inevitably hit a slow season, and no industry is immune to the challenges they present. But rather than remaining reactive to these changing conditions, predicting and planning for peaks and valleys in revenue streams can significantly improve your budgeting accuracy throughout the year. Business owners should, therefore, take the necessary time to analyze the trends associated with seasonal demand and plan accordingly.
Paying attention to your sales cycle helps with more than just better understanding your business’s seasonality, however. Following your sales cycle closely gives you better insight into areas of your business that may need to be improved and can be more efficiently managed. While slower revenue months may be a sign of seasonal demands that are out of your control, they may also point to inefficiencies in your sales and marketing efforts that could be contributing to your losses.
For example, many times business owners will focus their attention on the bottom line when reviewing profitability month to month and year to year. This top-level view can sometimes miss underlying issues affecting your business growth like poor performance from the sales and marketing teams, missed deadlines, and inadequate forecasting efforts. Maintaining visibility over all of these KPIs will help you benchmark your organization’s growth abilities and ensure all departments are functioning the way they should.
6) Consider Changing Your Approach to Talent Management
One of the most significant considerations business owners need to factor in with their overall budgeting is how they approach talent management. Employees are the lifeblood of any organization, but one business may have very different viewpoints when it comes to their hiring formats and organizational structures than the next business. Creating an optimal budget for your employees can be challenging, especially when balancing growth and profitability. However, business owners are wise to consider all the pros and cons associated with being too aggressive or conservative when choosing the right budgets.
Employees affect every aspect of your business operations, especially your revenue streams and overall profitability. Still, business owners need to decide how much value they are willing to place on any individual employee while also considering the costs associated with sourcing and training new hires. Along with this consideration, business owners also need to consider if outsourcing their employees is a better solution than hiring internal staff members. In some cases, the cost benefits may not outweigh the productivity risks of having an all-remote workforce.
7) Cut Costs Where Possible
As companies continue to grow, so does the need for adoption of larger scalable systems and sourcing of additional staff members. However, while many businesses may be willing to invest in their business as the need arises, fewer take the time to evaluate their legacy processes and cut costs wherever possible.
As the years go by, it can be easy to lose sight of how many little expenses can add up to be. Whether it’s the cost of paper products, equipment maintenance expenses, or even how you spend your time, anything required to run your business should be regularly audited to ensure it is still supporting your business goals.
Another important exercise is to regularly review the departmental workflows of a business to ensure they are still a critical part of the organization’s success. Certain processes can be a significant drain on departmental resources, even if you don’t realize it.
An example of this may be in teams who are used to creating their own ad-hoc reports for the projects they’re working on. Rather than having multiple people create similar reports and documentation, one person could be generating a master report and distributing it to the team, keeping the rest of the team members productive and eliminating duplicate work.
In these circumstances, business owners and department heads should identify potential areas of inefficiency like these and implement newer, more relevant workflow for their staff.
8) Improve Your Time Management
We have all heard of the saying “time is money,” and there are few things for small business owners that ring as true as this. The problem is that while we all understand and accept how precious our time is, many of us don’t know how to get the most out of it. When budgeting resources for your business, it’s critical you take active steps in establishing the right level of automation to streamline your processes and maximize your time efficiency.
Many times, productivity suffers at the hands of too many administrative workflows. While administrative tasks are a necessity to a certain degree in nearly every industry, they can also lead to lost opportunities for revenue growth and business scalability.
Business owners should look for opportunities to automate as many administrative tasks as possible without sacrificing accuracy. There are several affordable third-party solutions that businesses can integrate with their current systems that both streamline existing workflows and give employees back the bandwidth they need to execute higher-value activities for the organization.
Automation tools like IFTTT and Zapier are designed to connect multiple platforms together and create self-serve automation on everyday tasks. With a click of a button, businesses can save hours a day on automating their essential processes, giving them more time to focus on other areas of their business.
Small business owners have several challenges to navigate when growing their organizations, especially considering the increasing demands of today’s consumers and the dynamic nature of our modern digital landscape. To be successful, it’s imperative to be proactive when preparing for and addressing important financial decisions.
Establishing a budget and strategically planning your finances are crucial steps to ensuring its long-term viability. By following these essential tips and dedicating resources to improving your overall business efficiency, you’ll keep your organization scalable while ensuring it remains successful for years to come.