When your business has reached a point where growth is not just a possibility, but a promising opportunity it is crucial to ensure that you undertake a financial health check.
Like when you build a house – ensuring the foundation is solid is important before you build upwards. And a key part of that is preparing your business finances for the next stage of growth.
Here are some steps you can take to prepare your business finances for the exciting journey of growth ahead:
Financial Health Check
Before planning for the future, take a close look at your current financial situation. Evaluate your revenue streams, profit margins, and cash flow. Are there any areas of weakness or inefficiency that need to be addressed before you scale?
Understanding where you stand financially will help you make informed decisions about what happens next.
Set Clear Financial Goals
Define specific, measurable financial goals that align with your growth objectives. Whether it’s increasing sales, expanding into new markets, or launching new products/services, your goals should provide a roadmap for your financial strategy. Break down your goals into smaller, achievable milestones to keep you motivated and on track.
The key here is once you have set your goals – track, measure and adjust often! This will show you if you are on track, or need to make adjustments before you get too far off track.
Develop a Growth-Focused Budget
As you prepare for growth, your budget should reflect your ambitions. Allocate finances towards activities that directly contribute to business expansion, such as marketing, sales efforts, and product development. At the same time, ensure that you’re maintaining a healthy balance between investment and profitability. Your budget should be flexible enough to adapt to changing needs and priorities as your business grows.
Optimise Your Pricing Strategy
Your financial health check should also include a review of your pricing strategy. Pricing is a powerful lever for driving your revenue growth. Review your pricing strategy to ensure that it reflects the value you provide to customers while also maximising profitability. Consider factors such as market demand, competitor pricing, and perceived value. Don’t be afraid to adjust your prices if necessary to capture more value from your offerings.
Explore Financing Options
Growth often requires capital investment – putting money into things that may not show a return for a while. This can be daunting.
Explore various financing options available to you, such as small business loans, lines of credit, or equity financing. Evaluate the pros and cons of each option based on factors like interest rates, repayment terms, and impact on your ownership/control. Choose the financing solution that best aligns with your growth plans and financial objectives – get advice if you don’t know what is best for you.
Invest in Scalable Systems
As your business grows, so will the demands on your financial systems and processes.
If you don’t have good systems in place – it can be the downfall of your business very quickly. Have systems in place around record keeping and financial records, Invest in scalable accounting software and systems that can accommodate increased transaction volumes, reporting requirements, and regulatory compliance. Streamline your financial workflows to improve efficiency and accuracy, freeing up time and resources for strategic activities.
Technology is your friend here. Learn the best way to use your accounting system and how to get information into it. Things like Hubdoc (used by Xero) or Dext – anything to get receipts and invoices into your system easily and efficiently.
Monitor Key Performance Indicators (KPIs)
It’s good to have a plan for growth but how do you know if you are on the right path? Measuring how it is going!
Set some key financial metrics that indicate your business is on the right growth trajectory. These may include metrics such as customer acquisition cost, lifetime value of a customer, gross margin, and return on investment (ROI).
Regularly monitor your KPIs (monthly at least!) to gauge the effectiveness of your growth strategies and make adjustments as needed. Making a decision based on data is better than gut feel – so use the data to your advantage.
Seek Professional Advice
Growing your business can be complex, especially when it comes to financial matters.
Seek guidance from a professional who can provide expert insights and support. It’s better to have this advice before you put your plans into motion so you aren’t surprised by matters that you weren’t aware of.
Structuring, compliance, legalities – they may all change as you grow so getting the advice up front will help you be prepared for what changes lie ahead. The right Advisor can help you navigate financial challenges, identify growth opportunities, and optimise your financial strategy for long-term success.
Preparing your business finances for growth requires careful planning, strategic decision-making, and a proactive approach to managing the numbers. Ensure the foundation is strong so whatever you build upon it stays standing!
By following these financial health check steps, you can be more confident that any planned growth will be sustainable. Growing can be equal parts daunting and exciting – Embrace the journey ahead with confidence, knowing that a solid financial foundation will support your aspirations for success.
Michelle Maynard | Partner at Carbon Group
Michelle Maynard has been a Partner with Carbon Group since 2017, bringing a wealth of experience in accounting and bookkeeping.
Michelle started her career as a cadet in the Australian Taxation Office, then as a graduate at PwC and before joining Carbon, she was a manager at PKF.
Michelle specialises in providing tax and accounting advice to SMEs and HNWIs and their family groups, working to achieve the most effective strategies for them and to help achieve their desired lifestyle.
Since joining Carbon, she has also been recognised as a Top 50 Women in Accounting (2018), New Partner of the Year (2019), 40under40 (2020), 20 Future Chartered Accountants of the Future (2021) and Top 50 Small Business Leaders (2022). Furthermore, she is also Channel 9’s Finance Expert and has been dubbed Michelle Money Maynard by Mix 94.5.
We Are Emersyn uses an inclusive definition “female” and “women” and we welcome trans people, women, genderqueer women, and non-binary people who identify, have identified, or have been identified as female, women, or non-binary.