Want to grow your business? Here’s how to plan it

Your financial records are capable of far more than checking compliance boxes.

They can offer valuable insights into your business’ performance and help with future planning and strategies.

After all, numbers don’t lie.

Use them to guide structured and purposeful reviews of your business. Conducting these reviews regularly will give you the chance to reflect on your business wins, losses and challenges, as well as highlight your opportunities for growth.

In this article, we’ll share what financial metrics you can use to effectively review your business to drive growth.

Measure your KPIs

Key performance indicators (KPIs) are quantifiable metrics which help businesses track their progress towards specific goals. They provide an objective measurement for evaluating your business’ performance over time.

Some examples include:

• Financial: revenue growth, profit margin, cash flow, sales target.
• Customer: number of leads, customer acquisition cost, complaints.
• Operational: inventory turnover, operating margins, delivery on time rate.
• Employee: employee turnover rate, satisfaction rating, absenteeism.

Choose KPIs which are relevant to your business as they’ll provide the most helpful, actionable insights.

The most important thing is to keep your record keeping up-to-date and review the KPIs regularly. This will give you an overarching view of the business’ performance to date.

Well-executed, KPIs can serve as a compass, providing invaluable data for improvement and guiding the business towards your goals.

Income vs. expenses

An excellent guide to your business’ financial health is the difference between your income and expenses. It’s a basic way of understanding how much it costs the business to generate revenue.

This will determine whether you’re operating a profitable venture or in need of some strategic readjustments. It can help identify risks, income volatility and potential financial instability.

Your income and expenses can inform your decisions about budgeting, cash flow management and investments.

Budgeting

A necessary evil, budgeting allows you to set financial targets for your business.

To get the most out of the budgeting process, set realistic targets and review the figures month to month.

Budgeting figures can highlight revenue opportunities, allowing you to direct future resources to areas with maximum profitability. Meanwhile, it can also uncover potential overspending, so you can free up cash flow for alternative investment options.

By reviewing your budgeting figures, you’ll gain insight into your business’ financial health and operational (in)efficiencies, as well as guidance for future investments and growth.

Segment your customers

Applying the 80/20 rule (or ‘Pareto principle’), 80% of your revenue often comes from 20% of your customers.

By identifying this valuable segment, you can direct marketing initiatives, product development and other business decisions to cater to their specific needs and purchasing behaviours. By allocating resources to the most profitable customer segment you can maximise returns.

While it can be beneficial to focus on your most valuable customers, it’s still important to maintain a diverse customer base for risk management, so you’re not over-reliant on a single customer group.

Customer segmentation allows your business to take a more personalised and targeted approach, to ensure your operation is sustainable and capitalising on opportunities for growth.

Opportunities

Great opportunities are hidden gems. Most don’t present themselves loud and clear. If they did, everyone would pounce on them.

Being able to recognise opportunities when they come your way can offer avenues for expansion, diversification and increased profitability. They give your business a competitive edge.

Create opportunities by knowing your competitors and their strategies; this can help you to distinguish your business or fill market gaps. Also, review your business’ unique strengths and consider how these can provide new opportunities.

Comprehensive business guidance

Your financials are an excellent resource for planning the growth of your business. Understanding and monitoring your financial records can help you keep tabs on your business’ performance and highlight areas for growth. The path to business

growth isn’t a sprint, but a marathon, requiring consistent effort, strategic foresight and continuous adaption to changing market conditions.

If you’re looking to grow your business and wanting to take the next step, talk to one of our trusted business consultants. At Ascent Accountant, we offer personalised knowledge and mentorship across all facets of business. Speak to us today and let’s reach your business’ potential together.