Future growth plans in the short-term and long-term are not always easily identifiable. Cameron Kriss, President of Best Payroll Services suggests, “You need to take one step back if you want to take two steps forward in business,” and “investing money, time and other resources is absolutely imperative if you want to improve your company’s finances in the long term.”
Here are five practical ways to improve your company’s fiscal outlook in the long-term:
Invest in a market survey.
One of the problems that many small and mid-sized businesses make is this: they try to do too much. Consider this: a business associate suggests you begin selling a particular product extension because that’s what many of his friends want. Another industry peer says she read an article that a specific kind of service is the future of your industry. One friend after another has an idea about what you should market and ell.
Is accepting this kind of advice wise? Often you won’t know until it is too late and you’ve sunk time and money into their ideas. More importantly, you can run the risk of selling too many products and services in the first place. A market survey is a much better way to determine what will succeed in the marketplace than relying on anecdotes from business associates, friends, or even short-term sales. Investing in a customer survey could spur an increase in revenues and profits that dwarfs what your company spent on the survey.
Focus on what you do best.
Do you recall the high-technology boom of the 1990s? For a while, it was such a high-growth industry that companies in other industries became involved in high-tech. Many of these ventures failed because high-tech newbies didn’t know what they were doing.
Charles Warton, VP of Operations for Credit Card Processing Specialists says: “Focusing is what often separates the winners in business from the losers in business.” “Your focus should be twofold — producing or selling what the public wants and producing or selling products or services that you have expertise in producing or selling.” The U.S. Small Business Administration (SBA) blog, in an article entitled 3 Tips for Growing Your Business During Tough Times asserts that focusing on your “core strengths” is particularly important when the economy is bad.
Invest in people.
Paying employees as little as you can get away with sounds like an appealing way to improve your company’s finances. It is appealing — if those same low-paid employees are very productive. The better strategy is to find the best, most productive people for each and every role. That sounds like a pain in the neck. It is, but it’s worth it.
“Too many companies are too slow to make personnel decisions,” said Josh Moody, President of Top Credit Card Processor Ratings. “Firing people is never easy, but unproductive employees often reduce their colleagues’ productivity. Hiring a productive employee can have a positive domino effect on the company.” Josh believes it’s wise to hire productive independent contractors instead of employees if your company needs people at particular times rather than all year.
The SBA dives deeper into this topic by asking the question: Hire a Contractor or an Employee? There’s a distinct difference between the two and misclassification “may have a number of costly legal consequences.”
Consider expansion financing.
Many small businesses need new equipment to manufacture a better product. Many other small businesses need a new office in a better location — or a larger office to accommodate growth. Saving money until you can afford to make a large investment sounds wise, but it can be penny wise and pound foolish. In fact, you can lose a market opportunity by waiting.
Of course, spending money you don’t have is impossible. Consequently, you should explore business financing options including a small business loan. SBA loan programs are available for small businesses that want to expand.
Explore a joint venture.
Small businesses can increase revenues and profits by co-investing in a project with another business that they don’t have the wherewithal to invest in by themselves. For example, there might be a parcel of land in an area that is attractive to prospective homebuyers, but the small business can’t afford to build homes on that parcel.
Instead, the owner can persuade another company to help buy the parcel or build the homes. Joint ventures are an ideal way for two companies to improve their finances. The companies share the expenses on a project.1 They share the revenues as well, but the revenues would be zero without the joint venture.
Will any of these strategies work? There are, of course, no guarantees but they are proven tactics that may make sense for your small business.