You might have set up a business budget when you first started your company, but how much attention have you given your financial strategy since then? You may be more focused on making enough to pay your bills and your daily list of tasks to think about what you want down the road for your business. Yet keeping an eye toward the future is necessary for sustainable growth.
Whether your company is still in its infancy or if it’s been established for years, you need a financial plan to direct you toward whatever’s next.
Step 1: Dream Big
Forget about where you are with your business right now (especially if you’ve been struggling). This step is all about dreaming as big as possible. What do you want for your business? If money was no object, what would you do? Hire employees? Expand into additional locations? Develop new products? Step back and let someone else run the business? Any of these examples are great ways you could take your business to the next level.
Forget the what-ifs and buts for now and just let your imagination run free. Write down your vision.
Step 2: Calculate Costs and Timelines
Now take each thing on your wish list and determine how much money you would need to make it a reality and over what period.
Let’s say you want to open a second location for your retail store. Do a little research into commercial real estate in the area where you’d like to open a location. Build a budget for that second location, including rent, overhead, staff, and additional products. The good news is that there may be some cost savings since you wouldn’t need to duplicate everything for another location (like your accounting software), and you might be able to pay less per unit for inventory if you’re ordering for 2 locations.
Now that you have a number, consider how long it would take you to get up and running. You’ll need time to secure financing (or save it), find space, remodel, hire help, and launch the business, so allow for ample time to do so.
Step 3: Look at Your Financing Options
Certainly, if you can bootstrap your way to your goals, so much the better. But don’t let low funds in your business bank account keep you from realizing your entrepreneurial dreams. Look at SBA loans and lines of credit as options to help you come up with a lump sum for bigger goals like opening a second location.
If you want to hire more employees though, you might not want to take out a loan to do so. Instead, start putting aside a larger percentage of your profits until you have enough to cover an employee’s first few months. Ideally, hiring extra help will enable you to make more revenue, and then the employee will pay for herself in value!
The key to being smart about financing is to make a plan for how you’ll pay it back. It might sound great to get access to $100,000 to grow your business, but once that installment plan comes due, you don’t want to struggle to pay it. Know exactly how you’ll use any money you borrow, and only borrow what you need. There’s no sense in paying interest on money you didn’t need to borrow.
Step 4: Create Financial Projections
Now it’s time to put yourself in the future. What will your business look like once you’ve achieved your goal? How much more money could this action bring in for you? For example, opening a second location might help you double revenues.
Be realistic with your projections, because the last thing you want to do is be overly optimistic and then find that the expansion puts such a financial strain on you that you have to close your business.
Step 5: Choose Your Adventure
Now comes the fun. You’ve laid out what it will take to hit various goals, so now you can decide which you want to focus on first, and which you want to save for further in the future.
Lay out your timeline and set up action items to accomplish. For example, if you need $X to achieve your first goal, create an action item to set aside Y% of your revenues each month until you have the amount you need. You might also have an action item to create a job description if you want to hire your first employee, as well as setting up processes so that training her will be a breeze.
Track your progress toward your goal so that you know how close you are over time, and readjust your goals if necessary. The key is always keeping your sights set on the future and working toward expanding your business in a deliberate and strategic way!