Creating a Strategy for Growth

Tip #1 – Create a solid foundation for growth by understanding financial performance

 

Growth strategy in four basic steps

 

Step One: Understand your recent performance

Producing monthly management accounts is an essential practice that allows you to understand how your business is truly performing.  Knowing your recent sales figures, overheads, profit margins and most profitable products or services gives you full clarity of your business – meaning you can make informed plans for future growth. Allocate time every month to compose and compare these figures. What is working and what isn’t will be right in front of you! Now you can confidently plan changes to make your business grow.

 

Step Two: Create a clear plan to achieve your goals

Now that you can clearly see your recent performance, you can plan the future direction of your business.

But first, it is time to reflect on and decide what your personal goals for the business are. The key is to identify exactly what you want out of this journey – and only then should you start planning how to achieve it.

There are many questions that you should answer to give clarity to your vision including: Are you in for the long or short term? Is your focus on profit or something else? What do you want in terms of work/life balance?

Most business plans look three to five years into the future. Consider what ‘success’ means to you? What do you want your future role in the business to be? And what is your brand message? With these answers in mind, set ambitious but attainable targets for your business in areas such as turnover and profit.

Now that you have your long-term goals in place, you can focus on breaking down what you need to achieve in each coming year.

 

Step 3: Set an annual budget

When you know the annual sales and growth figures you need to achieve you goals, then you can formulate your annual budget – with an integrated plan of action for sales and expenditure.

Decide which activities you need to prioritise. This will show you where your main expenditure should be allocated for the year. Focus on those products and resources that will establish the turnover that you’re aiming for.

Set specific targets and develop a time plan to achieve them. Monitor actual performance (with your monthly management reports) and compare this to your budget targets to keep your business on track.

Your budget is the most important thing to stay on top of from the get-go. Keeping a constant eye on your budget is a must for your business to thrive.

 

Step 4:  Go with the (cash) flow

Putting it simply, your business success is all down to your cash flow.

The sales and expenses of your business (money coming in and going out) determine what assets and liabilities your business has. Assets are the things owned by your business, while liabilities are what your business owes to others. Together, assets and liabilities create your business cash flow. As well as operating costs, remember to factor in overheads and other financial commitments. Consider reducing your payment terms or extending your credit terms to ensure you have enough money coming in to cover that next big order.

You must create time-specific budget targets so that you can compare your actual performance. This way you can closely monitor progress toward – or deviation from – your budget goals and, therefore, keep your business on course.

Having a detailed and accurate budget is the most important way to stay on top of your business. Keeping a constant eye on your budget is a must if you want to build a thriving, sustainable company.

If you have an accountant, they should be your first stop for business advice. If you don’t have an accountant or they can’t help, BuBul has a wide range of experts available. For more business advice get in touch with our expert* Neil on LinkedIn?

*We’ve picked experts we know and trust who are good at what they do. All of them will give you at least an extra 30 minutes free advice if you contact them and would then charge their normal prices. They don’t pay to be on BuBul and don’t give us any money from anything they earn as an expert.