“Turnover is vanity, profit is sanity but cash flow is reality.”
Growth does not always lead to rising profit margins. Likewise, turnover is not a business’s measure of success.
By understanding your business, you can see what is generating turnover but more importantly what is generating profit. Because growth does not always lead to an increase in profit margins you need to grow your business in the most effective way to maximise profit. This involves extensive planning, and you need to consider:
- What is the purpose of growing?
You need to understand your reasons behind why you want to grow. You may want to grow for financial reasons, to evolve your business or for new opportunities. When you have identified your reason you can plan your growth accordingly.
- What are your growth targets?
These need to be realistic but challenging. Your views will change during the process, but it’s important to have growth goals to enable you to plan your finances, cash flow and help create your business plan. You can always adjust these targets accordingly in the future if needed.
- What is your process for growth?
Firstly, you need to allocate time and the right resources to achieve growth. You need to set out a financial plan to make sure that you have the right funding options and that you have fully understood your cash flow position. It’s vital to be forward looking.
To achieve growth, you need to understand why you want to grow, set growth targets and then plan, including resource allocation and finances. Once these are all in place you can plan to achieve sustainable growth.
The S4B Team
We are a team of Chartered Accountants and Business Doctors who help businesses grow, increase profits and maintain a strong cash flow position. Find out more by getting in touch. Send our team an email at firstname.lastname@example.org or call 01628 623444 to see how we can help you.