As more Australian small-to-medium businesses (SMBs) emerge from the grip of pandemic-related disruptions, some are building momentum for growth. According to Australian Bureau of Statistics figures, total new capital expenditure rose by 1.1% in the quarter to December 2021, with buildings and structures rising by 2.2%.
Furthermore, as a report by McKinsey & Company points out, now is a great time for ambitious business owners to take advantage of the immense opportunities available to those ready to reinvent and respond.
If you’re planning to expand, here are six ways wise money management can foster your success.
1. Plan to succeed
The occasional business grows organically, but most require a plan for expansion. If you aspire to build a bigger business, a detailed budget helps you set goals, address potential issues and monitor progress. Consider your short- and long-term goals. Look at where you can save and where you might need to spend to succeed. If managing money or budgeting isn’t your strength, your finance professional can help you make informed financial decisions.
2. Optimise profitability
Improving your profitability can generate extra money for growth. Some ways to boost your profits include:
- Reviewing your profit margins to see whether your average mark-up needs to be increased.
- Enhancing productivity by finding ways to optimise the efficiency of your operational or business processes. For example, investing in software could deliver a healthy return on investment by freeing up your time and energy (or that of your staff) for higher value tasks.
- Developing new business strategies. For example, could you sell existing products and services into a new market, or could you meet the needs of your existing customers better?
- Examining your financial profit drivers, such as your fixed and variable costs, sales volume, inventory, and debt costs.
- Evaluating the non-financial profit drivers that also impact your financial position, such as customer satisfaction, employee morale, innovation and business culture.
3. Cut costs
Another way to enhance your bottom line is to decrease spending. Some ways to do this include:
- Reducing direct costs and overheads – by finding cheaper energy rates or product suppliers or negotiating better deals, for example.
- Cutting unnecessary spending – even small purchases add up over time and affect your margins.
- Managing your inventory – freeing cash tied up in excess stock can improve your cash flow and profits.
- Eliminating any unprofitable products or services.
4. Improve sales revenue
Boosting sales revenue is another way to gear up for growth. Some ways to do this include focusing on your most profitable customers, raising your prices, improving your customer service, developing upselling and cross-selling strategies, and finding new customers and/or markets.
5. Review your debt
Loans are often crucial for SMBs to get started, but is your debt still serving you well? Many business owners have multiple debts across several lenders. Consolidating loans can help you manage cash flow and run your business more efficiently. You could also consider switching to a loan that better suits your needs – especially if your business has evolved and you’re preparing for a growth phase.
6. Fund your future
For many businesses, growth requires an injection of capital. For example, you might need asset finance to invest in additional plant or equipment. If you’re expanding into new national or international markets, trade finance can provide fast funding for stock, inventory and raw materials so you don’t have to knock back new orders. If you’re keen to take advantage of new opportunities we offer a range of flexible finance solutions to help businesses access the capital they need to grow. Speak to us today to explore your funding options.