All business enterprises survive the volatility of their competitive industry sectors with financial savviness and sustainable profitability. Pragmatic financial decision-making is crucial to support strategic and sustainable growth, allowing businesses to flourish and expand operations.
Unfortunately, an overwhelming number of startups fail to survive the first year of their inception. Why is that? Failure stems from a lack of financial planning, cash flow, debt, and supply chain management. Suppose your business is spending uncontrollably on technology, talent, and asset acquisition, without managing its revenues. In that case, failure is an eventual consequence.
Lucrative financial planning is crucial to support sustainable growth, profitability, and cash flow management. Keep reading to embrace strategies that support financial savviness and business growth.
1. Polish your Financial Acumen
Many entrepreneurs and business owners are artisans, craftspeople, and creatively-inclined artists who don’t have the head for crunching numbers. Your artisanal and creative talents will contribute to your brand image and vision, but they won’t support profitability and growth. Getting comfortable with financial planning, taxation matters, and cash flow management is crucial to run a profitable enterprise.
Do you plan on hiring financial advisers and accountants to delegate all your financial planning and responsibilities? It may seem a viable solution until you start fearing a heavy loss of transparency, accountability, and credibility. Entrepreneurs with little or no financial insight are always at risk of getting tricked by fraudulent accountants and employees.
Young entrepreneurs with a finance background should consider pursuing an MBA finance online to polish their financial acumen. An MBA will instill leadership skills, equipping you with advanced taxation, accounting, and financial planning expertise.
The online learning landscape offers a robust infrastructure that allows entrepreneurs and professionals to learn at their pace. It eliminates the barriers of traditional classrooms, making the pursuit of higher education accessible and affordable.
Entrepreneurs who don’t see themselves embarking on a finance-specific degree must consider workshops, certifications, and training to build their skills. You cannot delegate your financial planning to employees, regardless of how loyal or experienced they are; it never works out. Active involvement in economic decision-making, forecasting, and cash flow management is crucial to maintain transparency and accountability.
2. Setting SMART Goals with a Strategic Vision
Does your company have a strategic plan with SMART goals to map out your company’s profitability, growth, and asset acquisition? Devising and executing a financial strategy demands entrepreneurs to set SMART goals. A company’s goals are only achievable when specific, measurable, attainable, realistic, and time-bound.
The economy is vulnerable to volatile changes driven by inflation, recessions, booms, and the dynamics of demand and supply.
You must develop a strategic plan to maintain a robust balance sheet, liquidity, and equity by reducing your expenses and maximizing profits. You should consider having an expense report software as this tool will help you in tracking your business expense. Organized records will help you in having efficient ways to budget your business finances.
. Forward-focused planning is the foundation of overcoming unforeseen challenges and obstacles and improvising with adequate resource allocation.
3. Evaluate, Strategize & Improve
Companies grow by evaluating their performance, strategizing, improving their financial health continually, and planning for the future demands to assess your past performance and make room for improvements.
How did your company perform in the last six months? Did you lose customers because of the recession, or did the demand for your products/services increase? Have your revenues increased or decreased? These questions will help you conduct an in-depth financial stress analysis to understand your financial standing and strategize effectively.
Experts advise entrepreneurs to undertake an integrated financial model driven by assumptions and analysis. This model revolves around extensive forecasting to predict the following:
- Balance sheets
- Income statements
- Revenue generation
This model will help you predict the revenue-generation capacity and expense management abilities of your company. It’s crucial to make predictions based on various scenarios, products, and services to avoid unpleasant surprises and improvise effectively.
4. Explore Lucrative Opportunities for Growth
Companies that aim for growth must strategize and actively explore avenues and opportunities to expand their operations and customer base. Do you want to attract customers from all over the country or expand your reach to the entire region? Or perhaps, you want to open up retail stores in multiple locations throughout the state?
Digging deeper for opportunities to grow and expand requires entrepreneurs to introspect elements that support profitability. For instance, which products/services bring in a more significant chunk of your revenues? Who are your most loyal customers? Can you find suppliers willing to deliver quality materials at a cheaper rate? Most importantly, which competitors affect your profits and revenues?
Businesses that are struggling to survive seldom manage to set their sights on growth and expansion. It’s crucial to get out of survival mode, analyze your strengths and weaknesses, and set priorities to aim higher and grow undeterred.
5. Acquire & Retain Customers
Customers drive revenues, profitability, and business growth, while a loss of customers results in negative publicity and an eventual decline. Acquiring and retaining customers are challenging endeavors, and yet, they are necessary to support a growth-focused vision. Businesses survive and grow based on the popularity and loyalty they enjoy from their consumers.
Entrepreneurs must prioritize continual market research to understand the evolving preferences of their customers. A visionary customer strategy will help you build lasting customer relations with a personalized approach.
Modern-day entrepreneurs have access to a wealth of digital tools, software, and automation solutions to streamline financial planning. These tools and accounting software solutions equip entrepreneurs and financial novices with empowering tools to ensure transparency.
Making strategic financial decisions doesn’t always require you to balance complex sheets and income statements. But you must learn how to interpret and analyze these statements to embrace weaknesses and capitalize on your company’s strengths. Carve out a financial vision and set goals and milestones to actualize your vision with well-executed strategies.