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7 Financial Strategies for Future-Proofing Your Business
You’ve worked hard to build your business from the ground up. Things are going well. You are profitable. Work with great clients. Have an amazing team of people by your side. And yet, it’s hard to enjoy your success without constantly questioning it. Will you continue to be profitable? What will your business look like in five, ten, or twenty years?
If you’re a business owner, you probably ask yourself these questions quite often. You are not alone. The world throws a lot of curveballs, and there’s no crystal ball to help you see them coming. But there are some ways to protect yourself if they do. Here are 8 financial strategies you can use to future-proof your business.
Keep Your Taxes In Check
Only speak to your accountant during tax season? It might be time to take your relationship to the next level. Working with a CPA throughout the year can help you mitigate future surprises. Otherwise, you could find yourself in some hot water both legally and financially.
This means keeping your records pristine. But it could also mean managing and understanding payroll taxes, as well as reporting income accurately against all 1099-MISC forms you receive. No one wants to get audited, and certainly no one wants to get charged back taxes. Other tips to avoid future surprises include keeping your personal and business expenses separate, and making sure your business is correctly classified.
Explore New Revenue Streams
The best way to stay future-forward is to maintain a growth mindset. That could mean expanding your current offering. But it could also mean providing new offerings. You already have a network of people or businesses that turn to you to solve a problem. Now might be the time to ask yourself, “what other problems can I solve for my customers?”
Consider digitizing or productizing a current service you already offer. You could also look at vertically integrating by taking over another level of the supply chain. Speak to your customers and see what they need. By diversifying, you can future-proof yourself against any one of your revenue streams failing.
Find New Ways to Finance Your Business
Maybe you bootstrapped your way through the first few years. Or borrowed money from family members. Or took a loan from the bank. However you got here, you’ll likely need some cash to go further – and you’ll need that cash to be cheap.
Try restructuring your existing debt by seeking out loans at a lower interest rate. You never know – since taking out your original loan, you’ve likely built up credit for your business. Now’s a great time to use it. You might also consider equity financing through an investor or a new partner. However, you structure your debt, make sure the terms won’t cause you turbulence down the road.
Cashflow Video Guide
Learn the simple steps to prepare cash flow projections to improve your business cash flows.
Mitigate Risk
Of course, there are forces of nature that you can’t control. Factors like a volatile economy and rising interest rates can have a massive effect on how you run your business. However, by investing in the right insurance, you can weather the storm.
Workers’ compensation can help you and your employees generate income in the event of an accident. Property insurance protects your physical assets from theft or damage. Professional liability insurance can cover your business against negligence.
Not to be overlooked, business interruption insurance can get you through a natural disaster that forces you to pause operations. Some of these options may seem extreme, but having them in your back pocket can guarantee the longevity of your business.
Keep A Close Eye On Your Costs
We all know how important it is to manage costs. But that doesn’t just mean rethinking where you order lunch. To really future-proof your business, you need to make sure that your high level expenses are as low as they can possibly be. Failing to do so can cause you cash flow issues in the future.
To slash expenses, try consolidating any services or software you pay for. You’d be surprised how much money you save. Similarly, get vendors to pitch for your business, then regularly review their invoices. You want strong partners, but you also want to make sure you’re not overpaying. On the whole, try to make as many expenses as you can variable instead of fixed. Flexibility is key in times of hardship.
Manage Liquidity
Cash is king. It’s a bit of a cliche, but as much as people hear it, far too many business owners don’t live by it. The reality is, a cash crunch can seriously test the foundations of your business. This is especially true during economically uncertain times. Make sure you’re managing your liquidity any way you can.
The best way to do this? Streamline your cash collection. By developing a system that either automates or otherwise accelerates payments, you can save yourself from operational challenges on the backend. Another tip is to centralize your cash in the event you need to use it immediately.
Have a Succession Plan
You have probably thought about what you’re going to do when you retire. Have you thought about what your business is going to do? If you are a business owner, drafting a plan is a must for the future success of your company.
It’s not just about keeping the doors open. A lot of people depend on the success of your business, like your vendors, employees, customers, investors, and community members. Keeping them in the loop about your succession plan will keep them confident in the continued success of your business. There are also a lot of financial and tax implications of turning over a business. Knowing your succession plan well in advance can make this transition a smooth one for everyone.
Conclusion
It’s impossible to know what the future has in store. Even the most successful businesses can fail in the long run if they’re not thinking future-first. It’s just as true with technology as it is with your financial strategy. Make sure you know your numbers and stay close to your accountant to properly future-proof your business.
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