Financial goals for entrepreneurs & small businesses
Startups and small businesses face a unique set of financial circumstances. Even if they have access to a lot of capital, they have a much smaller margin of error than large corporations do. They can’t afford big misses on products or initiatives. They need return on investment, and it often has to be quick. They need to take advantage of growth opportunities when they arise. Perhaps most importantly, and often the biggest source of headaches for small businesses, their accounting needs to be airtight. Small business and startup owners need a solid financial plan in place to stand the test of time and become a well-established community pillar.
Stay SMART
Hoping and praying isn’t going to do much for a business’ finances. Owners need to set SMART goals, ones that are specific, measurable, achievable, relevant, and time-bound. Vague nice-to-haves won’t cut it. Specifics like increasing market share by 5% provide something to shoot for and a measuring stick of what success looks like and what it doesn’t.
A goal like doubling revenue in six months sounds great, but if there’s no realistic chance of it happening, it’s a pointless exercise to set a goal there’s no chance of reaching. Achievable goals offer something to work toward and can be motivational, especially as a deadline approaches. Those deadlines are important, too. If a business needs to be profitable by a certain date or has a loan maturing, the goal has to be reached before then. A day late won’t do.
Cash Flow
Having ready cash available is vitally important for small businesses. About 40% of small business owners turn down opportunities because they’re unsure of their cash flow, Brett Sussman, head of marketing & sales for American Express Business Blueprint & Banking, told BOSS. They’re passing on potentially huge projects because there are upfront costs they’re not sure they can afford, or they can’t hire enough people in time to deliver.
With streamlined cash flow management tools like Business Blueprint or PlanGuru, entrepreneurs know what’s coming in, what’s going out, and what’s on hand. They can then take advantage of opportunities like bulk buying at discounted rates.
“With that sort of inventory in your store, you’re now seeing increased foot traffic, your marketing is more effective because you can talk about a new wine or a truffle that you were able to procure for your restaurant, things of that nature,” Sussman said.
Addition & Subtraction
A startup or small business is likely to have taken on some debt. Loans to pay for inventory, machinery, rent or a building purchase are common. There’s no shame in them, they’re often necessary. But they also come with interest that just keeps accruing. Paying down that debt, by say 10% per year, saves the business money in the long run and sets it up for good long-term financial standing. This will also improve the credit score of the business, making it an appealing investment for creditors in the future.
Businesses looking to grow sustainably can set goals for increasing revenue by achievable margins, something in the area of 5-10% annually. Revenue optimization tools like Salesforce Revenue Intelligence and Podium’s lead generator can help. To translate those revenue increases into better profit margins, they need to find ways to cut operating expenses. Payroll and accounting automation like Xero can help. Zoom’s AI-powered collaboration platforms can cut travel budgets and allow businesses to take advantage of a dispersed workforce. Using tools like these, small businesses can keep their core customers happy, deepening the relationship and extending the life of the partnership.
Return on Investment
With cash tight as it is, small businesses and startups need their investments to really pay off. That includes money that goes into R&D. MOD Ventures client advisory services provide industry analysis and identify potential product or service additions that can win new clients and retain existing ones. The planning experts at Finance Strategists can make recommendations on untapped markets to enter and areas where operations can expand to deliver solutions for new clients in search of services they haven’t found elsewhere. This could be better-targeted marketing, new equipment, or more inventory. Whatever the investment is, it needs to have a big impact within a fixed amount of time.
Assuming businesses make the right moves, they’re playing an infinite game. Periodically, owners and founders need to reassess their goals and investments, learning from the past and making adjustments for the future. Success is always a target, but there are milestones to hit along the way.
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