5 Financial Strategies Your Small Business Should Be Using For Long-Term Success
For any business to survive in this competitive landscape, there must be a constant need for strategy development and retooling. Many small businesses often make the mistake of creating a strategy but never quite developing it, or even developing one at all. Although it may not seem as necessary, an overall business strategy is key to any sort of long-term growth and success.
Instead of letting it stagnate though, there must be constant measurement and evaluation to ensure that targets are being met and that the business is growing like it should. Barry Glassman, a contributor for Forbes, laid out of some of the key financial strategies a small business needs to grow in a recent article.
1. Outsourcing as a competitive advantage
Generally, outsourcing may not seem like an appealing situation. After all, it may even seem more complicated to employ contractors rather than having full-time employees since there will be a need to draft employment agreements, and other considerations.
However, it is important to consider what stage your business is currently in and what the immediate needs are. In the beginning, while protocols and operations are being established, it is easier to have contractors in place rather than employees.
They can help refine processes, and are better prepared to deal with growing pains with a bit more patience. It is also far cheaper than having employees, and associated benefits - this will reign true even after the business is established.
A general rule of thumb across industries is that three contractors are able to fulfill the work of one full-time employee - and three different people may have more talent than one person. While this may be indeed be a cost-saving measure, it is also important to consider the opportunity cost in this scenario. Full-time employees will generally come with more stability and there may be less turnover comparatively.
2. Lean and mean is indeed a viable strategy
Many businesses hold on to the idea that everything must be perfect before launch - even if that means years of development and extravagant offices. However, that could not be farther from the case. The Lean Start-Up by Eric Ries should probably be included in the reading list for anyone interested in owning and running a small business.
As Glassman explains in his article, the premise of the book is simple. Instead of holding on to notions of supposed perfection before a business launches, start with a rudimentary form.
Once you have a basic concept, use that as the launch board for the business and invite feedback. It will also help gauge interest in the product or service, and allow for more innovation across the board.
3. Separate your personal & business accounts -- permanently.
The temptation to mix business and personal accounts is often strong, especially in the beginning. It is a natural instinct to an extent, it only makes sense that you would pour in your resources to see your business succeed. And if in doing so, the lines between personal and business are blurred, then there is no harm right? Unfortunately, adopting a practice like this early on will be detrimental to the long-term viability of your business.
Investing added personal resources will only drain your business, and doing so would mean that your business may not be able to operate without your own resources. If this is the case, it might be time to examine financial operations and the business should undergo a deep and thorough assessment for sustainability.
4. Automate your business accounting
While there should always be "human" aspects to the business, there needs to be a careful balance between automation and the human aspect. Accounting is one of the processes that benefits from automation, since it reduces the possibilities of human error to a great extent.
For example, accounting software such as QuickBooks and Peachtree are systems that small businesses can easily adopt and learn. Their intuitive and user-friendly interface make it easy for even non-accountants to learn.
Moreover, these systems are able to generate reports that will deliver key insights into your business operations that will directly feed into future strategy - and your accountants will thank you.
5. Get a CPA to fill in what you don't know.
No one expects business owners to be experts at everything, especially when it comes to the nitty-gritty financial details. For many small business owners, the real talent is in driving product and/or service innovation, or big picture management rather than the small details.
Trying to take over business operations in areas of unfamiliarity will most likely lead to a lot of errors and inefficiency. Instead, outsource as needed - the best way to get ahead of accounting and finances is to get a CPA to fill in the gaps and address financial issues as needed. Rely on their expertise rather than trying to do it all yourself - it gives you more time to work on the aspects of the business where your attention is needed the most.
Crafting a financial strategy that addresses business needs in the short-term while still keeping long-term goals for success in mind may often seem like an overwhelming process. To learn more about building strong financial strategies to drive success, please contact us.