Running a business can be a challenge at the best of times and perhaps more so in the current economic climate. The old adage ‘speculate to accumulate’ often rings true but deciding when to take the plunge and invest more money into your business can be a tricky decision. Invest too quickly and the business may struggle if the cash flow doesn’t keep up with the expenditure; act too cautiously and your business may not be able to branch out it quite the way that you would hope.
Formulate a business plan
The importance of a high quality, realistic business plan cannot be underestimated in terms of helping your business to develop at the right pace and helps you to establish the vision both in the short and the long term. A good business plan will establish exactly what you want to achieve and how you are going to realise your goals and will highlight what steps you can realistically take within your available budget.
When it comes to financial planning, the size of your business doesn’t matter. An effective business budget is essential for accurate financial management and helps you to decide when to take those calculated risks in order to grow your business and when to exercise prudence. In truth, small businesses that do not operate a detailed budget are much more likely to fail.
Having a budget helps you to ensure that there is sufficient cash flow and profit so that you can fully cover the expenses that your business incurs. In other words, you retain control. Most importantly, ensure that you are able to pay your essential business expenses – utilities, fuel, insurance, salaries and so on. By calculating these outgoings you will be able to estimate the amount of surplus cash that can be allocated to expand your business, whether it is an advertising campaign in a new location, an additional van or a larger shop floor.
Having confidence in your business
Having a clear and realistic business plan and a detailed and honest budget are essential prerequisites for any business of any size. With these in place you will be able to confidently plan your business’ growth while recognising the danger signs that may suggest you place any expansion on hold.
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