Making smart financial decisions for your small business is in some ways an exercise in predicting the future. You need to anticipate where you’ll be in the next quarter, the next year and even the next five years. To do this successfully, you’ll need plenty of data about your past and current financials combined with some soul searching about your goals for your business.
While there is no crystal ball predicting your company’s future, you can consider these three factors when making financial decisions for your business.
Stay on top of your cash flow
Cash is the very thing that keeps your business going. If you don’t have cash, you don’t have a business. Managing your cash flow requires regularly reviewing your financials and understanding what the numbers mean. This data will help you make smart decisions to grow your company and avoid debt.
Use your accounting software or work with your bookkeeper to create a cash flow forecast based on data from past transactions to predict your cash flow for the next few months. Create a plan to first pay your regular costs, e.g. payroll and utilities, then see what remains to reinvest in growing your business.
Reconsider what’s “worth” the price
When you’re growing your business, it’s easy to say, “I can’t afford that.” This mindset makes your decision all about cost: you would purchase the good or service but for the cost. While this seems like a smart financial decision, this kind of thinking can end up doing your business a disservice.
Instead, think of a potential service this way: what’s the cost of the status quo? Can your company afford not invest in social ad services, or in a bookkeeper to manage growing costs? If you’re open but still nervous, consider how you can hedge your bet. Try a trial period, or only commit to a small order before going all-in to see whether this investment is really worth it for your company.
Have an exit strategy
When you’re still growing your business, the last thing you want to think about is how you’ll be leaving it. But considering your future plans can impact your financial decisions. Do you want to retire from this job? You’ll need to build enough revenue to be able to invest in a solid retirement plan. Do you plan on selling the company, or would you like to pass it on to a family member? This can impact whether you focus on quickly growing profit potential, or focus on long-term stability.
Making smart financial decisions for your business requires a solid understanding of your current financials and a clear vision of your goals for your company. When you know what you ultimately want from your business, you can make the financial decisions that are right for you.
If you need extra support making smart financial decisions for your small business, MCG Solutions is here for you. Contact us today to get started.