Top 5 Financial Goals to Create A Healthy Business
Running your own business requires a certain passion and commitment (some would say insanity) that most simply can’t understand. There are practical elements required as well, however, for that passion to grow into tangible results.
Small business success at some point requires making critical decisions about money – resources to get started, funding for day-to-day operations, and hopefully enough profit at the end of the year to do it all again. Here are five priorities to keep in mind as you navigate the world of small business finance and strive towards your own financial goals.
1 - An Effective Business Plan
A business plan is a written description of your business (or your proposed business). It’s an essential part of securing small business financing, whether in the form of small business loans or individual investors. It’s also an important guide for yourself, as it forces you to clarify precisely what it is you intend to make or do and how you plan on making or doing it. In other words, it includes your strategies for making your business successful – both in terms of financial goals and your own personal vision.
What Goes In A Business Plan?
Start with the obvious – what, exactly, are you going to do? Who will your most likely customers be? What problem are you solving or what need are you meeting? Why would anyone use your business over their current options? How will they find out about you and what do you want them to know first? For most undertakings, you’re going to have to market yourself at some point in order to succeed. Your business plan should have a fairly specific idea of what this will look like starting out.
A decent business plan will outline specific targets for the next three to five years, broken into major and minor goals along the way. This gives you a road map of sorts moving forward and helps you determine whether or not you’re making progress in terms of your overall vision. It also gives investors an idea of what to expect, and a measuring stick for whether or not you’re on track with your financial goals.
Money Stuff
Finally, of course, your business plan should address how much money you need to get started, how you plan to raise that money, and how you plan to make enough money over the next three to five years to meet your most basic financial goals. You don’t need a no-fault pathway to millions – in fact, it’s usually best to plan on and strive for gradual, consistent growth. If you don’t have a plan for reliable growth, you’re not ready to start your business.
2 - A Meaningful Mission Statement
Your mission statement is related to, and often part of, your business plan, but they’re not the same thing. At first glance, it may not seem connected to the financial goals of your business, but it absolutely is. A meaningful mission statement is just as essential to the success of your business – financially and otherwise – as any other part of your business plan. Maybe more so.
A useful mission statement generally needs to address three things.
Is it simply the pride of working for yourself? Do you have specific financial goals? Are you determined to change the world through better toothpaste or a revolutionary approach to home decorating? If you don’t know what you want, how will you know if you’re succeeding?
Most successful businesses solve problems or fulfill wants and needs. You don’t really go to that fancy local coffee place because you simply can’t make decent coffee and a muffin at home. You go because you like the way it feels to be there, and the way they treat you, and yes – because you like the coffee and the muffin. Conversely, I’ve walked through endless shops full of nifty displays, but they’re not solving a problem or meeting a need for me. There’s no intangible itch they scratch in my psyche. It’s just cool stuff – and that’s not enough.
What sort of culture are you creating? What opportunities do you provide? The money matters, but it takes more to retain the best people and for them to be the best they can be on your behalf. How are you going to find the right people and keep them happy?
If your only goal is reliable income and something to do with your time, keep your regular job. Entrepreneurship is about bigger things and richer meaning. Otherwise, what’s the point? At the same time, the vision outlined in an effective mission statement is essential to the bottom line. Without it, you’re far less likely to reach your financial goals.
3 - Focus on the Big Picture
Obviously, your business won’t last long if you don’t make money. Even if your founding vision isn’t driven by financial goals, the need for at least modest profits is one of the realities of American capitalism. Focusing too intensely on making money, however, tends to obscure the larger picture. It’s inherently short-term, and thus short-sighted.
If you want your business to succeed past its toddler years, don’t do whatever it takes to make money. Do the things most likely to make your business successful, and ideally, your financial goals will follow.
Example: Customer Satisfaction
It’s not necessarily true that the customer is always right. It’s a pretty safe rule of thumb, however, that happy customers may tell one or two of their friends about you while unhappy customers will rant about your incompetence and cruelty (however unfairly) on social media as well as to every waitress, cab driver, or passing stranger they encounter.
Happy customers come back; unhappy customers strike back. Human nature is simply a bit of a twisted beast that way.
You may not be able to make every customer happy, on the whole, it’s better to have a satisfied customer than an immediately profitable transaction. You don’t want to lose money on every transaction in hopes it will promote a warm, fuzzy glow in those you serve, of course. But if you can’t meet a specific customer need, for example, consider pointing them to someone who can, even if it’s a competitor. They’ll make the sale, but you’ll be remembered as the one who solved their problem. If you mess up, own it, and explain. If the customer messes up, consider letting them off the hook and making up for it next time.
Most customers don’t expect everything to be perfect, but they would like to know that you’re both competent and concerned with their happiness. Over time, this builds loyalty. The more they come back to you, the closer you are to your financial goals.
Stay The Course
The same idea applies to your treatment of your employees, your branding, your marketing, and other aspects of your business. Yes, you must be practical. Yes, profitability is essential. Don’t ignore the very valid role of your financial goals. But you made a choice to take certain risks because you had a vision of what your business could be. Don’t take shortcuts and don’t sacrifice that vision for someone’s thirty pieces of silver. It’s not worth it long-term.
You can’t control everything impacting your business from the outside. You can control your internal values, personal work ethic, and your “brand.” Before making a change or taking a risk which might result in short-term benefits, ask yourself what it means to your plan for your business a year from now. Five years from now. Ten. Does this change or risk support that vision, or is it primarily appealing because it might make it easier to meet payroll next month?
Money matters, but long-term success comes from long-term decision-making.
Make Smart Financial Decisions.
Meet Goalry.
4 - Do the Math
I know, I know. I just scolded you about over-focusing on the money. Now it sounds like I’m about to argue the exact opposite. That’s because I’m about to argue the exact opposite. (At least I’m being honest with you about it.)
Sacrificing vision for short-term gain is a legitimate no-no, but so is relying on rainbows and unicorns and your own plucky charm to meet your financial goals while ignoring basic math.
Entrepreneurship is an inherently self-contradictory exercise. You begin by sacrificing personal and financial security to chase a vision you hope will lead to personal and financial security. You take major risks based on your faith in yourself and your ideas and labeled a visionary if you succeed, but a fool if you falter. You’re told to pay attention to the market and do your research, while at the same time inundated with fuzzy ideas about doing what you love instead of what seems popular and practical for meeting your financial goals.
Creative types deal with this all the time. The nature of music or any of the arts is that you must follow your muse, break the rules, march to your own drummer, yada yada yada. At the same time, if you want regular work as a musician, you’d better be able to play “Freebird” or “Gloria” or whatever’s hot with your target audience these days. There’s a reason so much of the surviving work from DaVinci, Michelangelo, and their ilk, are portraits or religious themes – that’s what patrons would pay for.
So yes, I’m telling you not to let it all become about money, then telling you to be realistic about what it might take to meet your financial goals. If this seems unfair and paradoxical and not immediately helpful, welcome to the world of owning your own business.
Budgets and Checkbooks and Payroll, Oh My!
There are more immediate and mundane aspects to finance and your small business as well. Whether you’re a naturally mathy-math type or not, whether your small business budget involves hundreds of dollars or hundreds of thousands, you absolutely must have a budget. You absolutely must keep up with your daily finances in addition to considering your longer-term financial goals.
Anticipate taxes and payday and inventory needs. Balance your checkbook. Do the math.
Running a small business includes doing all the same things you do with your personal budget at home. They’re just more involved and sometimes more difficult. Chances are you didn’t decide to become an entrepreneur because you wanted more spreadsheets to maintain, but this is “have to” stuff. Eat your vegetables, say your prayers, and keep up with your business income and out-go, whether it’s fun or not.
It’s usually not.
Finally, you can’t always control how much you make, but you can control how much you spend. Yes, it takes money to make money. BUT, you don’t have to do everything everyone thinks you should do. Sometimes you don’t even have to do everything YOU think you should do. Especially if the numbers say you can’t afford it.
5 - Establish Your Business's Credit
Ideally, you start your business small with minimal investment, then grow as you start to experience profitability. The more you make, the more you grow – make some deposits, sign some checks, make some deposits, sign some checks. Repeat until fabulously wealthy and a household name.
In reality, however, small businesses often need access to funding at times they’re not taking in huge profits. Small business loans are a standard part of growing your business and often a sign that positive things are happening. You don’t want to survive on loans indefinitely, of course, but just like in your personal life, there will be times you need a little fiscal wiggle room to survive.
You may need equipment, or technology, or resources to expand. It may simply be that your business is seasonal and you wish to be prepared with inventory before you have the income to pay for it. Small business loans are a normal part of running your own business and essential to meeting your long-term financial goals.
There are also bad reasons to take out a small business loan. If you’re unable to meet basic expenses month after month and proceeding solely on hope something magical will change, going further into debt is unlikely to improve your situation. That same stubborn belief that drives entrepreneurship can lead us into some foolish financial decisions if we’re not careful.
On the other hand, if you’re growing faster than you can keep up with and need more space to take advantage of the possibilities, that may be a risk worth taking. If you require updated equipment to remain competitive or expanded inventory to support a few calculated risks consistent with your business plan and mission statement, those are standard small business leaps of faith.
Securing the Right Small Business Loan
If you haven’t been in business for long, most of your business’s credit will be based on your personal credit history. You’ll be expected to document your income and other personal information, and lenders will check your credit score and most likely run a full credit report. Over time, as your business grows – and more importantly, as your business establishes a strong track record of paying back its loans on schedule – it will establish a credit history of its own and rely less on your personal status to secure future loans.
Business loan shopping can be a bit daunting at first. You’ll often be expected to explain your business plan and mission statement, and you’ll quickly discover that not everyone shares your vision or belief in what you’re doing. (Then again, if they did, they’d probably be out there competing with you, so…) You won’t always be approved, and when you are, you may not always be offered the terms you believe you deserve for the loan to support your overall financial goals. It can be a discouraging process.
Improve your odds by educating yourself ahead of time about the different sorts of small business loans. If you’re concerned about your business’s ability to secure major financing down the road, start with smaller loans early in the process and make sure they’re paid off in a timely manner, thus strengthening your small business credit. You may even consider taking on one or more partners or seeking investors, although this changes the dynamic of how your business will be run – and that’s no small thing.
Final Thoughts
Finally, don’t limit yourself to traditional financial institutions. Here a Loanry, we maintain a pretty impressive database of reliable online lenders, many of whom specialize in situations just like yours. Many started off as small businesses with a vision to support small businesses through a different approach to lending and a commitment to long-term customer relationships.
Sound familiar?
No one said it would be easy to reach your personal or financial goals as a small business owner. That doesn’t mean it has to be harder than necessary. Let us know if we can help.