Chances are you’ve heard about entrepreneurs desiring a profitable and sustainable business. Many know what a profitable business requires, but sustainability isn’t always clear.
So, let’s break it down a bit.
What is sustainability?
In a Fast Company article on business growth, sustainability requires having a repeatable sales model you can scale.
When it comes to sustainability, the conversation is most often about sales. Meaning there are consistent leads and sales conversions, forecastable revenue, and positive profit margins. It’s a numbers game where more of one thing leads to more of the other, either in equal or greater proportion.
But operating a sustainable business depends as much on our expenses as it does on our sales. Profit margins will shrink when we’re not managing our expenses. Thus reducing the sustainability of our business.
So, the question is – how do you achieve sustainable growth when scaling your business? These next three tips will point you in the right direction.
Know Your Expenses
Your first step toward sustainability is getting to know your expenses. Do you know how much it actually costs to run your business? Expenses are a critical factor in determining profit. Profit impacts the ability to sustain the business.
Regardless of selling services or digital products, you have general costs of doing business. General costs may include website hosting, software applications, subscriptions, contractors, consultants, etc.
Knowing your expenses prepares you for the next step.
Shrink Your Spending
Next, determine where you can be more resourceful and wise with your spending. Review general business expenses. Are you getting the most out of your paid applications and subscriptions? Or are they sitting there waiting for use? I’m willing to bet that you could trim a little here and not miss a beat in business performance.
Recognizing when you trade expenses for sales is important to gaining clarity on profitability.
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“If spending another $1 in your business only gets you $1 in sales, that’s not increasing your profitability.”
It’s an equal trade. You want to earn a return on your investments, not break even.
Plan for Future Expenses
Finally, plan for future expenses and investments. This goes a long way in solidifying sustainability. Set up a few months of savings (cash reserves). The savings enable you to cover general business expenses, payroll, and quarterly estimated taxes. This practice can be as easy as earmarking the funds in a spreadsheet that tracks your total savings balance. Or having separate accounts for savings. Planning for the future provides peace of mind even if you never have to tap into your savings.
Sustainability for your business means continuity and longevity. It means freedom from stress in slow months because you’re prepared. And it requires discipline in the flowing months when you’re stuffing your financial cushions.
Use these steps to gain greater peace of mind. Peace knowing you’re building a business that will sustain itself, those you provide for, and YOU!