Finance Growth Stages Operations

Stage 1 – Non-negotiable rule: Track and preserve cash

As a Stage 1 Company (1-10 employees), one of the greatest challenges is generating, tracking and preserving cash. Cash is King is the mantra for successful companies. Many business owners recognize early on that simply ‘making money’ isn’t enough. You have to keep enough of it to reinvest in your company in order for it to grow. Here are three tips on how to do just that.

1. Create a budget.
It doesn’t have to be complicated. Business guru Jack Welch said business should be simple, and we agree. A simple spreadsheet that you create that projects income and expenses and shows you gross and net profits is all you need. Most business owners feel a budget is simply a waste of time ‘because everything changes all the time so what’s the point?’ We hear this often. Our answer is that a budget is simply a tool – it’s not a direction or a goal – it’s simply a tool to help you make decisions. Say you projected $5,000 in income in June and based buying a new software program off that projection. Then the June income only came in at $2,500. Should you wait to purchase that software?

2. Determine and track the success indicators for your business.
How do you judge and track the success of your business? Is it the number of clients you have? Is it the amount of money a client spends with you? Is it the average cost per hour that you spend with a client? If you have a retail business, do you want to know how many clients walk in the door every day? How many sales you make? What the average sale is? No matter what business you own, you need to determine what are the key indicators that “indicate” that the business is successful. Then look at these key indicators daily to track and measure the success of your business.

3. Allocate some percent of your income to growing the business.
This is the hard one. By the time that check arrives, you’ve already spent it 10 times over. This is a discipline that will pay off. The amount isn’t critical at first. Creating the discipline is what’s critical. One idea: Ask your bank to take a specific amount out of your checking account every month and transfer it automatically into savings. Start with a small amount that you know won’t break the bank and add to it as your income grows.

This article, derived from content created by FlashPoint!, is based on the 7 Stages of Growth concepts developed by the Origin Institute and James Fischer. It was contributed by Jacqueline Sousa, a certified Growth Curve Specialist and regional director of the Florida SBDC at FIU.

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