Long-term business success takes a lot of planning, dedication, time, and resources — and it doesn’t happen overnight. In fact, about 20 percent of small businesses do not survive the first two years, and only about 30 percent survive to the 10-year mark. As a small business owner, how can you set up a robust plan to create a strong business and foster long-term growth? We’ve compiled four top tips for achieving long-term financial success in your small business.
1. Develop a Business Financial Plan
While a business financial plan is one of the most important elements to long-term success and growth, many small businesses do not have one. Creating a financial plan is step one in securing long-term financial success as it is an overview of your financial situation and projections for future growth. This is where you can monitor and manage cash flow, budget for expenses, keep track of your sales revenue, etc.
Within the financial plan, there are several key components:
- An estimate of your sales revenue for each month, quarter, and year in order to identify upticks and downturns and adjust growth strategies accordingly.
- An overview of regular ongoing expenses as well as both expected and unexpected future expenses.
- The assets and liabilities within your balance sheet that determine your business’ net worth and help maximize potential value.
- Projecting cash flow to identify how much money you can expect to be left at the end of every month that can be put toward expansion. This also allows you to set the right payment terms for your business and its clients.
- A break-even analysis that helps you determine how many products or services you need to sell to not only cover your costs but provide a comfortable margin over your expenses.
2. Be Prepared For Change
Adaptability is one of the number one ways to keep a business running successfully, which we have seen many examples of throughout the pandemic economy. This includes adapting to new technology, changes in the market, and product demands, but it also applies to having enough structure and cushion within your financial plan to meet changing conditions. This is why it’s important to build a financial plan as described above with the necessary components to create leeway for adjustments and unexpected expenses.
3. Do Your Research
Whether you’re just starting a small business or have been running one for several years, it’s critical to crunch your numbers and continue to do so over time. For example:
- What are the projected acquisition and staffing costs based on your location? How has that cost changed over time, and how is it forecasted to change in the future?
- Have you considered any potential safety or insurance costs?
- Does your financial plan cover both immediate and long-term needs?
- Have you identified in detail the demand for your product or service and whether you can meet that demand?
There are many more questions to ask yourself as you’re researching and laying your foundation, but these are a good place to start.
4. Talk to a Professional
Building a small business has a lot of moving parts, and sometimes it’s overwhelming to do it on your own. Speaking to professional bankers, lawyers, accountants, and financial advisors can help steer you in the right direction and help you earn more wealth, invest wisely, increase revenue, and keep your business on track for long-term success. Reach out to one of our team members at Republic Bank today for more information: 800-526-9127 or visit our blog page to learn more!