Top 5 Tips to Scale Your Business While Still Making a Profit
Listen to the Podcast Episode Link: https://growingyourteam.com/ep162-carla-titus/
Are you looking to hire new people, scale successfully, but you’re not so sure about how to do it, while still paying yourself?
Taking a proactive approach to your business finances is key to achieving success. That’s why in this article, I’m giving you my top five tips on how to take a proactive planning approach to hire new people, grow your business, and scale successfully.
1. Understand Your Finances
Before you begin, it’s important to understand your numbers to make informed decisions about hiring and scaling your business. Take the time to review your financial statements and analyze your financial performance. This will help you identify areas of opportunity and areas of concern.
If the numbers side of running a business is overwhelming you, you’re not alone. This is a common concern for a lot of business owners. Seek help or professional advice to make this process easier.
So how can you understand your finances and make informed decisions to grow your business?
Start Here:
● Understand your cash flow: Knowing your cash flow is key to understanding your financials. You need to know how much money is coming in and going out of your business as well as when money is coming in and going out. The timing component is critical, and this is what allows you to better manage your cash. This will help you make informed decisions about when to invest in your business and when to save. It is always a good idea to have a cash cushion to weather the ups and down of running a business.
● Read your profit & loss statement: Your profit and loss statement show you how much money your business is making and where it’s going on a define period like one month. This will help you identify areas where you can cut costs and areas where you can increase investment to drive revenue and growth. Start with the major 4 categories: revenue, cost of goods sold/service, operating expenses, and profit/loss. Don’t forget to allocate money towards covering quarterly taxes and paying yourself.
● Track your expenses: Start by doing an expense audit for the last 3mo. What have you spent money on that has benefited the business, help saved time, or improved your revenue? Activities like advertising and marketing can lead to bringing new business which could turn into profit. Track that relationship of invested dollars to actual results. You will start to notice trends on what is working vs what is not so you can cut back on those expenses that are no longer serving your business.
● Review your balance sheet: Your balance sheet shows you the assets and liabilities of your business essentially the net worth or value. Make sure that all the balances for each account or personal investment you have made are accurate. If not, consult with your accountant or CFO to correct your balance sheet.
If you need help understanding your financials, reach out to a fractional CFO or financial consultant. They can help you get clarity on your finances and make sure that you are making informed decisions to grow your business.
2. Set Financial Goals
Once you understand your numbers, it’s time to set financial goals. It’s important to have a clear vision of where you want your business to be and how you plan to get there. Financial goals help you stay focused and motivated to reach your desired outcomes.
Here are some questions to ask yourself:
What do you want to achieve in the coming year?
How much revenue do you want to generate? And How?
How much profit do you want to make?
It’s important to set both short-term and long-term financial goals.
Short-term goals are goals that you want to achieve within 12mo, such as increasing your profits or reducing expenses. Long-term goals are goals that you want to achieve in the next 2-3years, such as achieving financial independence or retiring early. Make sure you goals are measurable, time bound, actionable.
Once you’ve set your financial goals, it’s important to break them down into actionable steps. This will make it easier to stay on track. For example, if your goal is to increase profits, you could break it down into steps such as increasing sales through marketing activities, reducing unnecessary expenses, or finding new sources of revenue by creating new offers or entering new markets.
Along the way, don’t forget to keep track of how you’re doing! Tracking your progress is an important part of achieving your financial goals. It also helps you stay motivated and on track and allows you to adjust as needed.
3. Create a Budget
A budget is essential for scaling any business. You are allocating dollars to the areas of the business that need investment to grow and expenses that will support generating revenue. By forecasting, how those expenses will be allocated, know you start to understand how much revenue is required to support those expenses. Also, you are working to make a plan for future months where you are intentional on spending categories instead of reactive.
Creating a budget doesn't have to be complicated. Start by listing your income and all your expenses (use the last 3mo as a guidance). This includes rent, utilities, employee expenses, taxes, software, etc. Be sure to include any irregular expenses that you may have, such as travel or charity. Measure each expense as a percentage of revenue. As your business grows, this will help adjust the allocation to grow with your business.
4. Monitor Your Cash Flow
One of the best ways to make sure that you’re making the right decisions is to monitor your cash flow. Cash flow is the money coming in and out of your business, and it’s important to make sure that you’re not spending more than you’re taking in. You also want to make sure that you can afford to hire the right people and get a positive return on your investments.
Here are a few tips for monitoring your cash flow
● Make a list of all your payables: Payables are all the money your business owes to vendors and suppliers. Make a list of all the bills your business must pay and the corresponding due dates including loan payments, as well as your expenses, such as payroll, rent, utilities, etc. Don’t forget to ask for payment terms from your vendors and suppliers specially those you are always ordering from consistently and have built a good working relationship. Payment terms can be Net 15, Net 30, and higher, meaning you have an additional 15 days to pay the invoice instead of it being due today.
● Track your accounts receivables: Accounts receivable is the money that you’re owed from customers. It is essential that you have a strong invoicing system, that you invoice on time and that you have a way to follow up on late payments. Cash coming in from money customers owe you is how we can afford to pay employees, taxes, expenses, etc and if this is not coming in on time, it can cause mayor issues. As the business grows, the needs for cash increase and having a credit card or line of credit can help better manage fluctuations while you are waiting to get paid.
Cash flow is the lifeblood of any business and monitoring it will let you see if you can afford to hire. Monitoring your cash flow on a regular basis will also help you identify any potential issues before they become a problem.
5. Invest in Your Team
Once you’ve got your finances in order, it’s time to start scaling! Investing in your team is essential for any business that wants to scale. But, it can be intimidating to make the right decisions when it comes to hiring and managing a team.
Start by creating a hiring plan with different scenarios. If I bring a new team member at this yearly salary on this month, I will see them be fully up and running in 1-2mo. Understand the time it takes to have someone contributing to your results, is an important aspect of financial planning for the next hire. Also, we recommend that you have 1-2mo of their salary saved as a runway knowing they need time to onboard.
Here are a few ways you can invest in your team:
● Training and development: Investing in training and development ensures that your team is up-to-date on the latest industry trends, has the skills and knowledge to do their job effectively, and is equipped to handle any challenges that may arise. It also serves to motivate and engage your team, as they feel valued and appreciated for their contributions.
● Resources they need to do their job: This could include anything from the latest software and technology to access to industry-specific databases. Providing your team with the right resources can help them work more efficiently, effectively, and can help them stay ahead of the competition.
● Their wellbeing: This could include offering flexible working arrangements, providing access to mental health resources, or even offering perks and benefits. Taking care of your team’s wellbeing will help ensure that they are motivated, engaged, stay productive, and successful.
Investing in your team is essential for the success of your business - which leads to a better return on your investment!
Scaling a business can be an exciting and rewarding experience, but it can also be overwhelming and intimidating. It’s important to make sure that you are making the right decisions financially to ensure that you can afford to hire the right people and make a profit.
By following these tips, you can take a proactive approach to your finances and be well on your way to hiring new people, growing your business, and scaling successfully.
Is it time to get your bookkeeping cleaned up so you can get started on understanding your finances? Learn more about our bookkeeping services here!
If you’re ready to outsource your finances, learn more about how we can help!
If you want help creating and crafting your financial strategy, set up a consultation with a CFO to review your current financial situation and provide some options on how we can best support you.