Expansion!

Why isn’t your revenue increasing even though you’ve invested more money into your business?

Are you thinking about adding another team member?

Maybe you want to launch a new product or service?

What guides your decisions when you want to make a new business venture?

What helps you to make business decisions?

Are you using your current bank balance?

Your Gut?

Successful companies have a clear picture of their financial situation to determine how their future spending affects their overall business.

Because new ventures can help your business grow as long as they’re made from sound financial decisions.

Having a bookkeeper/accountant can help you determine if the decision is a financially sound one based on the current market.

By using accounting software we can provide detailed risk analysis. The profit and loss statements will help increase your revenue through accurate, data-driven decision-making.

Knowing exactly what your numbers mean for your business each month is crucial to increasing revenue in your company.

So make sure your spending decisions are made from a financially sound place that takes risk, profit, and loss into account.

Because thinking you need a new team member or product is completely different from making that decision based on the data your business is telling you.

Would you like to grow your business? Well, so would most of the CEOs around the world. When is expansion in validated from a financial perspective? You have heard quite a few times about companies expanding for a 3 or 5 year period and suddenly everything stops. You have heard about occasions when such a company would go from extracting into defaulting, within a very short period of time. These things do happen and can happen to all companies. One way to avoid it is by making proper research and going through the numbers.

For instance, there was a client that was considering expanding. They had a very good sense of sales, so it was not about reaching the sales target. nevertheless, they asked me to produce a business plan. Well as you can imagine, I was not given a lot of time, so I had to deliver something fast, as long as it was validated. Indeed, I did make my research. I went through different sales scenarios and different type of expenses. I calculated the necessary investments required in setting up the expansion.

After all said and done, and after many reviews it was clear to me that the numbers did not add up. It was clear that sales could not support the expansion. So, either the sales should grow, or the gross margin increase or the operating expenses decrease. Increasing sales was out of the question. This is a high-risk scenario, and when planning you should prefer defense rather than offense. Meaning that you should prefer working with the lowest probable income.

The second parameter, price, which again could not increase. As you can understand it is not easy to increase arbitrarily price. So, with the risk of losing clients I could not work with the scenario of increasing price. The last parameter was operating expenses. Having a long-lasting experience, I knew that expenses usually end up higher than expected. Also the client wanted to invest in customer experience and service level, so decreasing operating expenses would have caused both of them.

So, I presented the different scenarios to management, all pointing out that It would not be profitable to run the expansion. After explaining this idea to management the client did actually understand the point and did not proceed with the current expansion plan.

So overall knowing the numbers behind the decision-making in your business is absolutely key to increasing your revenue.

Having a professional bookkeeper/accountant generate different reports for you will make sure your products or services are optimized to give you the biggest profit.

But if we don’t use the numbers to make decisions about your company's financial future… Bookkeeping really isn’t going to do much for you.

Ask your team to get these reports for you and hold them accountable for doing so.

Also - Hold yourself accountable for taking the time to READ the story your numbers are telling you.

Finally, don’t forget- knowing how your products or services perform will allow you to make sound financial decisions and ultimately increase your revenue.

If you currently don't have a team to support you in this please feel free to reach out to us so we can see how we might be able to help.

Comment “MORE REVENUE” if you think we can help you create more profit in your company by implementing these strategies!