Your business is only as good as your capital strategy. If you don't have a plan for the financial growth and development of your business, then you're likely to find yourself floundering at some point in the future. If you want to get ahead of the game, it's time to develop an effective cash flow plan that will help you maximize profitability while minimizing risk.
Here are some important steps to take:
Include a projection of revenue and expenses over the next 12 months;
Include projections for sales, marketing expenses, labor costs, overhead expenses (rent etc.), capital expenditures (new equipment) etc.;
Identify opportunities for revenue growth such as new products or services;
Identify savings opportunities such as lower interest rates on credit cards or loans;
Look at ways to cut costs by outsourcing certain functions like HR payroll processing etc.;
Look at ways to increase profit margins by reducing waste in production processes;
Plan how much money can be loaned from other sources such as bank loans, lines of credit etc.;
Consider whether it makes sense for your business model to seek new debt facilities (or additional debt facilities) or investment partners outside stakeholders, family members, friends etc.;
Take into account ongoing costs associated with employees like benefits, insurance premiums, unemployment insurance payments, training, etc.;
Create a budget based upon these numbers then implement strategies which will help achieve them
Understand the Purpose of Your Business
Have you ever thought about the purpose of your business?
The most important aspect of developing a capital strategy is to understand what your business is about. What are your goals? What do you want to achieve, be known for and provide value to customers?
What we have found in our work with companies is that each company is unique and there can be different answers to these questions, but the overall strategy for growth and access to capital can be clearly laid out ahead of time, regardless of the nuances or differences between your industry and others.
Thinking about what makes someone want to hire or partner with your company is vital - what is their motivation and how does it aligns with their personal values?
Regardless of the need to additional profitability and the desire to grow your business, most business owners want people in their community see them as an innovator or leader in the industry. That perception creates the position of expertise, authority, and professionalism that customers and clients seek, thus growing their business, brand, reputation, and profit margins.
Know Your Finances
When you start a business, there are a lot of things to keep track of, but your capital position and cash flow are among the most important. You should be able to track your revenue and how it changes from month to month. You also need to know how much you're spending, so that you can plan for future expenses and make sure that your business has enough cash flow to, not only, operate smoothly but also grow. And finally, it's important for any entrepreneur or small business owner to understand their working capital as well as the break-even point (the minimum sales volume needed in order to cover all operating costs).
Take control of your business finances and develop a capital strategy that works for you.
You've worked hard to get your business off the ground. Now, it's time for you to take control of your finances. Developing a capital strategy for your business is an important step in building revenue and increasing profitability. It can also help you avoid financial issues down the road.
Once you have a clear understanding of where your revenue comes from and how much profit is made on each sale, it will be easier to make decisions about what direction your company should take next. With this knowledge at hand, developing a sales plan and marketing strategy that work with each other will be easier.
Conclusion
Your business is unique and the way you see your capital position should be unique as well. There are many ways to approach managing your money and developing a strategy that works for you. It’s never too early to ask for help. Most businesses cannot afford a lengthy trial and error period.