Congratulations! Your hard work and dedication is paying off–your business is growing. As your business continues to grow so too is the challenge to increase profitability, protect your financial interests and not be personally engulfed by the business. The additional challenges should not dissuade you from continuing on this journey. This post offers five things you should consider doing to help you meet the inevitable challenges that growth brings.
1. Know Your Numbers
Every business owner needs to know the financial condition of her business. As the saying goes, “You can’t manage what you don’t measure.” Even if you have a CFO (in-house or contract) you need to have a basic understanding of how to read critical financial reports and statements. The three most critical reports you should know how to read are the Profit & Loss Statement (aka Income Statement), the Balance Sheet and the Cash Flow Statement. The Profit & Loss statement shows the company’s total income and expenses over a certain period of time. The Balance Sheet is a statement of assets, liabilities and capital at a certain point in time. The Cash Flow Statement captures the amount of cash and cash equivalents entering and leaving the company. How to Read a Financial Report by John A.Tracy and Tage C. Tracy is an excellent resource to help business owners gain a fundamental understanding of critical financial reports and statements. Knowing and understanding the company’s numbers allows you to make business decisions based on the “metrics” and not on “emotion.”
2. Pay Yourself First
Do you want your business to serve you or do you want to serve your business? What is the point of all your hard work and risk taking if you don’t enjoy the fruits of your labor? Business owners often believe they have to sacrifice their financial well-being in order for their business to succeed. They forgo paying themselves in order to reinvest in the business or pay outstanding debts. Reinvesting is undeniably an essential part of growing your business, but you shouldn’t have to sacrifice paying yourself in order to continue to grow your business . Mike Michalowicz’s book “Profit First,” is an excellent resource that shows business owners how to develop a cash management system that turns their business into a sustainable profitable business that serves the owner. Remember, it is not how much your business grosses, it’s how much it keeps (profit)!
3. Consider Engaging a Tax Strategist
Warren Buffet famously stated that he pays less taxes than his administrative assistant. Engaging the services of a tax strategist can help you maximize the financial benefits of your hard work. A tax strategist is a financial professional who specializes in tax planning and strategy. They work with clients to develop tax plans that minimize tax liability and advise on tax implications of major financial decisions.
4. Consider Creating a C-Suite
As your company grows it may be time to consider creating a C-Suite of talented individuals who can help protect your business and guide you to more profitable growth. A C-Suite typically includes a CFO, COO and a General Counsel. Depending on your revenue, you should either contract out these services or bring them in-house. By leveraging their diverse professional backgrounds, their work can help your business grow even more and give you more time to work on the business instead of working for the business.
5. Contacting an Attorney
Naturally, legal advice is an essential part of any business. Counsel can help you navigate legal compliance in your industry, with employment law, or data privacy. They can also assist with contract review, and of course, dispute resolution. At the end of the day, you will have peace of mind, knowing that you have your legal team looking out for your best interests.
Building a sustainable and profitable business that can sustain itself and withstand all of life’s challenges is often a team effort. At our firm, we work with business owners like you every day; it’s what gets us up in the morning. If you would like to schedule a consultation to see how our services can benefit your business, call 202-499-5160 today.