How Not To Fail When Your Business Grows
I find it interesting how a company can grow and still fail. We’ve seen this happen all over the world before and during this pandemic. But how is that possible? How can a business that’s growing suddenly fail? In this article, we’ll answer that question and give you solutions on how to avoid the same fate.
You’re probably asking yourself, “how can business growth be a problem?” That’s the same question Steve asked himself when his business started to crumble.
The Problem With Business Growth
A few years ago, Steve’s business was booming, just like the economy. His company experienced a level of growth that made him believe it was a permanent way of life. He started spending money like it was the new normal; buying a big house and several cars, taking his family on elaborate vacations and eating at the finest restaurants. He was living his dream.
Then, out of nowhere, the unexpected happed. The pandemic hit, and it hit his business hard just like so many other businesses. He suddenly had a serious loss of cash flow. It was very difficult cutting back on expenses because he intertwined his business and personal lifestyle into this new level of living. Laying off most of his employees along with severing agreements and promises he made previously was one of the most difficult things he had to do.
The Blessing Of Financial Health
One day, a good friend, Matt, called Steve after hearing about his struggling business. Matt not only told Steve about the Stimulus packages that were available, he shared some advice that gave Steve a whole new way of operating his business.
Matt said, “Steve, we both know that you have the ability to make money, but now you need to learn how to keep it, control it and grow it. You must learn how to successfully manage your financial expenses so that your business will not fail.
Your company’s financial health is the key to actually being successful. Instead of trying to look great to others on the outside while you’re dying on the inside, create a sound financial presence that will impact the internal health of your business, as well as its outward performance.”
As Steve listened intently, he realized that, no matter how big or successful his company became, he had to understand the meaning of profitability. As Matt explained, profitability is when your company's total income is more than its total expenses. In other words, your company’s income minus its expenses is your net profit.
The Stability of a Financial Future
The problem Steve had was that he was spending the total revenue his company was generating and not making the wise financial decisions needed for sustainable profitability. Unfortunately, a lot of entrepreneurs and multimillion-dollar companies are doing the same thing Steve did. They’re turning big profits, but they are not profitable because they’re spending the company’s money as fast as it comes in.
Most of them are just covering their monthly expenses (if they can) and accumulating massive debt. They look great in the public’s eyes, but inwardly they’re financial poor because the leaders are mishandling the money. That’s one reason why people are surprised when they see these businesses fail.
After talking with Matt, Steve decided to change the way he’s been handling business growth and begin laying a foundation for a stable and secure financial future. He started understanding the math of his business, established a savings account along with other accounts and created a retirement plan. He began paying attention to how much of his income was being spent on fixed and non-discretionary expenses.
Realizing that he was becoming a slave to his business by just working for money, he began investing some of his income so that he could have his money working for him. These were some of the things Steve began to do in order to build a solid foundation for sustainable growth in his business.
If you don’t want to fail when your business grows, then start working on your financial health in the beginning stages of your business. Learn and understand the meaning of profitability. Know the math of your business. Start saving and investing some of your income.
Learn how to keep it, control it and grow it, so that your business will be stable in the midst of any crisis.
Don’t just look sensational, be sensational.