Financial Key 1: Consistent cash flow management Without consistent positive cash flow, your business will run like a three-legged stool with one leg broken. It may appear sturdy until a need arises.
Financial Key 2: Create an emergency fund in place for your business Ideally a healthy business should have between six months to one year of operating expenses set aside for the day when an unexpected need occurs. I have noticed that if a business doesn’t have an emergency fund in place, it seems like both business and life will become a string of emergencies.
Financial Key 3: Proper protection of the business Often small business owners will treat insurance as that ugly expense they would rather leave under the carpet. Many businesses I have worked with don’t have enough insurance on place – leaving their business vulnerable to potential risks. Conversely, others were paying too much on insurance for certain assets, liabilities, etc. It’s essential for a small business owner to review their insurance at least once a year.
Financial Key 4: Debt reduction Acquiring debt can be a powerful way to add an asset into the business. It allows a business to earn more while leveraging cash flow. Yet if not watched carefully, debt can quickly wrap its tentacles around the business and choke it out of existence. If properly managed, debt can be a good tool for growing a business. If poorly managed, it will be the death of even the strongest business.
Financial Key 5: Develop short-, mid-, and long-term investment Granted, the first and most important area of investing for your business is reinvesting back into the business so it will continue to grow. However, just like your personal life, it’s important for the business to diversify its earnings outside of the business in-order to help strengthen the long-term objectives of the business.
Financial Key 6: Consistent succession plan development for the business When some small business owners decide to retire, they simply turn out the lights and sell whatever assets their business may possess. Unfortunately, they never realize the true enterprise value their business should have created for them personally.