Just like when you started your business, growing your company will come with a lot of challenges. Rapid growth, if done correctly, can push your business past the competition. With that said, if you grow too fast without a clear plan in place, it can lead to disaster.
One area of your business that will need extra attention as you grow, is your finances. As your business expands, the everyday intricacies of your finance’s become more nuanced and difficult to understand. You must have a clear plan in place to maintain your business’s financial health when going into an expansion.
This guide will help you ensure that your business approaches expansion, safely and effectively.
Establish a Business Expansion Plan
Business expansion is a serious matter that should be treated as such. It can be enticing to take that extra cash you have saved, and immediately dump it back into the business, however this can lead to personal and business financial issues down the road. Spending your hard earned money without a plan can lead to disaster which is why it’s recommended you keep your personal and business finances separate.
When you start to think about expanding, draft a plan that addresses every facet of your business. Your business expansion plan should touch upon everything from logistical issues, such as office supplies, to more complex matters, such as investing in a new location.
As you establish your business expansion plan, be sure to set goals on specific aspects of your business finances. Goals allow you to gauge how your business is doing as time progresses. Some common financial goals to include in your business expansion plan are:
- Increase your revenue.
This should be a goal of every business owner. Increasing revenue means that your business is operating efficiently across all departments. As you set your revenue goal, look to your industry standard. Revenue growth rates will differ from industry to industry, but a 15-30% increase is the standard.
- Improve margins.
Profit margins are extremely important when it comes to running a business. If your margins are too low, you could be missing out on a lot of cash. On the opposite side, if your margins are too high, your customers could turn to a more cost-effective competitor. Try to find the most profitable number that your profit margins can get set at.
- Optimize cash flow.
82% of businesses fail due to cash flow issues. Cash flow is the net-amount of cash and cash-equivalents that is being put in and out of a business. Everything from inventory to operating expenses are included in cash flow. Conduct a thorough analysis to see if there are any quick ways that you can improve your business’s cash flow.
The best leaders are able to develop an effective plan. Having a plan will help reduce the risk of any financial issues arising when trying to grow your business.
Have Cash Saved Up
Growing a business will be a very costly endeavor. Almost every action your business takes will come with a pretty heavy price tag.
Oftentimes, businesses enter growth spurts thinking that they have enough money saved up from previous sales alone. They are usually wrong. Growing your business, no matter the size will likely cost more money than you think.
Not having enough money saved up is one of the biggest downfalls businesses experience when trying to grow.
If you know that you are looking to grow your business soon, start saving money now. You will not want your lack of funds to deter you from taking your business to the next level. Luckily, there are a multitude of ways that your business can build up cash reserves. A few ways that you can shore up your business’s savings include:
Business loans, similar to any other loan, provide a large amount of money upfront, with an agreed repayment plan between two parties. Loans are a great option when you do your research and find a loan that fits your business needs.
Crowdfunding is when businesses pitch their ideas to the general public in hopes that they donate to fund the project. While crowdfunding will bring you in less money than a business loan, it is great for businesses that need cash with no strings attached.
When you are thinking about ways to build up your savings, take a step back from the big picture and think about some small things that you can do to help your cash situation. No amount of money is too small to help your cash situation.
Lean On Outside Help
As your business grows, your daily processes will become more complex. The days where you, as the owner, carried out all of the business tasks, are over. You must delegate some areas of the business to others. Delegating the task of handling your business’s finances is a necessary step to take if you want your business expansion to continue.
Cloud-based accounting companies have become an increasingly popular choice amongst small businesses who need help with their finances. These accounting groups are experts within the business finance space and can provide remote assistance whenever needed.
Cloud accountant services are great for businesses of any size,and in any industry with the ability to help streamline and simplify processes. They can assist you with anything from payroll services to working with subcontractors and everything in between.
Owning a business is not easy to say the least. Even more difficult is navigating the complexities of growing a business and learning to adapt to changes along the way. Far too often, business owners do not know how to manage their finances while simultaneously going through a business expansion. Being proactive and mindful of your finances early on and learning to outsource this process as it becomes increasingly demanding can help in the future.
If you are worried about your financial situation, contact us today to learn more about our accounting services.