You know that starting a business is scrappy—you’re on the front lines, raising money, developing products and services, putting basic operations in place, and learning as you go. It’s a thrilling time, but it’s mainly about reacting to circumstances, keeping the lights on, and working out what to do next.
Once that breathless excitement (and stress!) starts to wear off, it’s time to look at the next steps—sustainably growing your business and getting the right finances in place to meet your goals. We’ve already talked about the stages of development in a small business, now it’s time to work out what that means to your business and finances.
We’ll explore what your long-term business goals might be, and how to get the finances in place to support them. We’ll start with the necessary nearer-term goals, so you’re financially secure enough to look towards the horizon. We’ll also explain some of the key steps to take, and the benefits that meeting business goals can provide.
Business Goal 1: Understand and Reduce Expenses and Costs by Analyzing Profit Margins
You probably have a basic idea of your overall profit margins, but once you have everything up and running, it’s time to dig deeper. This means getting a much deeper understanding of where you’re making or losing money, so you can maximize income.
How To Meet Business Goals by Understand Profit Margins
- Compare your projected profit margins to actual, real-world revenue and expenses and re-align expectations.
- Find new opportunities to reduce expenses, both per product sold and overall.
- Identify the most profitable products and services and where you’ll benefit from future development.
How to Get a Deeper Understanding of Your Profit Margins
- Identify the specific business lines (the products and services you want to measure) and collect real-world data on all of the expenses and revenues associated with each line.
- Carry out a deep analysis of “actual costs per item” by product line or service, digging into all of the expenses involved with producing and distributing one “unit” that you can sell.
- Figure your overall business expenses that can’t be attributed to a specific line, for example, your business rent, staff costs, equipment, or administrative overheads.
- Assign these overall business expenses across the costs of everything you sell.
- Establish a “Total Cost Per Item” based on your calculations.
- Identify unexpected and unplanned costs in your business lines and reduce them where possible.
Business Goal 2: Compete By Offering Higher-Value, More Keenly Priced Products
Now that you understand your profit margins, it’s time to see what your competitors are doing and to price your products and services to attract customers and deliver value.
How To Meet Business Goals through Better Pricing
- Understand the competitive landscape and marketplace for your products and services.
- Identify how and where your competitors are adding value for their customers, and what you can do for yours.
- Adjust your pricing and value strategies according to market research and consumer needs.
How to Price Correctly and Add Value
- Conduct market research of your competitors, the products and services they sell, and the prices they offer.
- Understand the “value add” that they provide when selling—are they competing on price, quality, speed, or something else?
- Identify the additional benefits and value your business can offer, using your market and profit margin research combined with understanding consumer needs.
- Adjust your pricing and increase your value accordingly, ensuring you demonstrate exactly how customers can take advantage of buying from you.
Business Goal 3: Get a Cash Buffer in Place to Ensure You’re Resilient in Challenging Times
If there’s anything we’ve learned during this pandemic, it’s that businesses need to be prepared for anything. Most businesses only have enough saved to run for 16 to 27 days without new revenue coming in.
How to Meet Business Goals through Having a Cash Buffer
- Ensure you can get through lean and challenging times without closing the business.
- Reduce the stress that you might have to lay off staff due to poor cash flow.
- Carry on meeting your commitments to suppliers and others.
- Position yourself for stronger growth once the crisis passes.
How to Get a Business Cash Buffer in Place
- Calculate your total expenses and costs per month and forecast likely scenarios, working out how much your business needs to survive for three to six months.
- Prioritize putting money into the cash buffer, don’t be too eager to take money out of the business or expand too quickly.
- Save money into your cash buffer every month.
- Keep your emergency money in a separate account, so you’re not tempted to spend it.
- Review and top up your cash buffer as you need to.
Business Goal 4: Think More Strategically by Hiring Experts
At some point, you will need to step away from the front line so you can think about longer-term expansion and strategy. This means putting expert managers and employees in place to help reduce the pressure.
How to Meet Business Goals by Hiring Experts
- Lets you concentrate on long-term business goals and strategic direction.
- Get additional expertise that can help you enhance operations and processes.
- Stop being the single point of contact for decision making and problems in the business.
- Build better trust and culture in the organization.
How to Hire Business Experts
- Identify the most taxing demands on your time and attention.
- Create an organizational hierarchy that allows you to delegate business functions and decisions.
- Look for recommendations from peers and others on the right people for each role.
- Hire based on attitude, approach, and competence.
- Give your experts appropriate autonomy and freedom.
Business Goal 5: Increase Revenue by Investing in New Products, Services, and Marketplaces
Your business is already expanding organically, but you want to accelerate growth by bringing new products and services to market, or opening up new marketplaces.
How to Meet Business Goals through Investment and Marketplace Expansion
- Generate new revenue streams from novel products and services.
- Break into marketplaces such as new sectors, industries, sales channels, and geographies.
- Rapidly accelerate business growth.
How to Innovate and Expand Into New Areas
- Combine profit margin analysis with customer demand to identify promising expansions to existing products and services.
- Commission marketplace analysis to determine consumer demand in your prospective areas.
- Complete detailed analyses and business cases to demonstrate you can get a solid return on investment.
- Carefully plan and execute on new product development and marketplace expansion.
- Measure and refine new products and services so they meet consumer appetite.
This high-level view of business goals will help you set an overall strategy for successfully growing your business. Remember that for long-term expansion, you need to get short- and medium-term goals in place, so you have a strong foundation to thrive.