If you run a business, you know the joy that comes when it starts to earn a profit, and all of your time, effort, and care begin to pay off. It’s a scary investment to make, even if you’re sure that your business idea will work, and it’s a great feeling when your dreams become reality.
So, once your business is earning money, does it mean that all that hard work can end?
On the contrary, the work is only really just beginning. Your business still has plenty of room to grow and reach new levels of success, but it’s up to you to guide it there.
The Dangers of Stagnation
One of the worst things that can happen to a business, short of it completely collapsing, is stagnation. A stagnant pond stinks and a stagnant business isn’t much better.
A business can stagnate if you don’t have a solid plan of where to go once you start earning a profit. Your company can languish in indecision, as you either decide to do absolutely nothing to help it grow, or you can’t decide between a bunch of options, so try to grow in three different directions at once.
Instead, you need to establish a plan for your business to continue to grow in a defined direction. Yes, there’s definitely room to be flexible, but you still need direction. Think of it like growing a young tree. If you want that tree to grow tall, you might need to provide support to keep its trunk straight, or it might grow twisted or stunted. You direct the growth.
One way to prevent stagnation is to constantly invest back into your business. This is all part of a healthy cash flow.
When your business turns a profit, what happens with the money? Well, some of it will go to you and any employees as part of a fair wage. Some of it will maintain the running costs of the business. And the money that’s left?
Rather than letting that money sit in a savings account or get wasted, make sure that you have a plan for it. A healthy cash flow doesn’t just refer to money coming into the business, but also money coming out of the business.
It’s up to you to do more with this money and make it work for you.
The Dangers of Uncontrolled Growth
While it seems counterintuitive to be concerned about growth, business growth isn’t always a good thing. Let’s return to our young tree analogy for a moment.
As well as providing support to guide the tree, a gardener will prune the tree on occasion and make sure that it doesn’t grow too rapidly. This is because the tree might not be able to maintain this growth or be strong enough to hold itself upright. Uncontrolled growth can lead to the tree becoming unhealthy and even dying.
The same applies to your business. A business boom can be a great thing, but sometimes a boom is just that. If you grow your business too quickly and without a solid plan or foundation, you may end up making swift decisions without thinking about them.
This can lead to your infrastructure suddenly growing to support a much higher demand. But if that demand dries up, you have to cope with higher costs and lower profits. This can end your business.
You may also fail to scale up your business evenly. So, while you can manufacture more products, you might not be able to store and ship them efficiently. Or you might end up with a lot of employees, but not enough managers, leading to further issues.
A healthy cash flow is a steady cash flow. Always keep an eye on the pattern of your finances. If you experience a boom, take advantage of it, but don’t allow your business to grow without any control or guidance.
Managing Money and Finances
When you have a small business, you might be able to get away with managing the finances yourself. In this case, you need to ensure that your bookkeeping is always up to date and on track.
Keep a running total of your business’s earnings, expenditures, and other aspects of the cash flow. This doesn’t just help you to keep an eye on how well your business is doing, but it’s also vital information for the taxman.
Taxes are, unfortunately, a fact of life when it comes to businesses and personal finances. You need to factor them into your costs. You also need to make sure that any tax returns are filled in promptly and accurately.
However, the taxman can, occasionally, be your friend. You might be eligible for certain grants or tax breaks, depending on your business.
Even this brief overview can represent a lot of work, and a lot of areas where things can go wrong. The best way to keep a regular track of your finances is to use a professional accountant or accountancy firm, such as Chesterman Accounting Services. This way, you know that your finances are in good hands.
Where to Invest Your Money
If you aren’t sure what to do with your money, this section might give you a few ideas of where to focus your attention.
First, it’s never a bad idea to expand on your marketing strategies. This can include digital marketing and content creation, where you create and manage a business website, social media accounts, and email marketing campaigns. These methods help you to reach a much wider audience. But there’s also something to be said for offline marketing to expand your local market. Like everything else, plan your strategy according to the needs of your business.
You can also invest in more employees or better equipment for your business. This will allow you to work more efficiently and handle an increased demand for your products.
It can be worth considering investing in cyber security, software improvements, and other upgrades to allow your business to be more secure and better able to help your customers.
Think about what your business’s strengths are and how to shore up any weaknesses, and you can help it to grow in a steady, controlled way.