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As an SME business leader, owner, or advisor, thank you for driving one half of the gross domestic product in the top 17 countries around the world (according to the World Bank). We need you now more than ever!
I wish you much entrepreneurial success.
Phil Symchych
Founder
Global Business Advisors Forums
To join, you must apply and qualify for membership and agree to abide by our rules. A one time membership fee of $495 USD may apply. Please register and provide your contact information so we may speak to determine if this community is a good fit for you, your business, and our group.
As an SME business leader, owner, or advisor, thank you for driving one half of the gross domestic product in the top 17 countries around the world (according to the World Bank). We need you now more than ever!
I wish you much entrepreneurial success.
Phil Symchych
Founder
Global Business Advisors Forums
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How (and why) to build your balance sheet.
The path to business growth isn't just revenue. Revenue needs lots of support under it. Therefore, the key to revenue growth is to build your balance sheet so that it can support future revenues.
Yet many companies focus solely on increasing sales without consideration for the balance sheet.
To build your balance sheet:
- Focus on improving your cash flow. Accelerate how customers pay you. Obtain longer terms to pay your suppliers.
- Don't waste cash to purchase long-term assets like vehicles or equipment; they should be financed or leased so that your cash outflows match the useful life of the asset.
- Start hoarding cash and keeping a cash reserve. At least three months of operating expenses is a minimum. Six months is better.
- Minimize inventory. It chews up cash, drives up overhead expenses, and reduces customer service. Read @Art Koch's articles for information on why "Inventory is Evil(TM)"
- Stop minimizing taxes. Your balance sheet needs to build up Retained Earnings to support good debt that can drive your growth.
- Tell your accountant to give you ideas on maximizing after-tax cash flow so you can reinvest in your business.
- Talk to your banker before you need money. Share your financial statements and business plans with them. They've seen it all and can give you good ideas. Bankers can be great partners to support growth and helping you build your business wealth.
Building your balance sheet may be less exciting than driving revenue growth. But a healthy balance sheet will support much more revenue growth in the long term. And that's pretty exciting.
Comments
Inventory is Evil because it delays problem resolution and the delays directly negativity impact profits.
Additionally, inventory is not an appreciating asset, it depreciates! So why do you want to tie up valuable cash that worth less with each passing day.