Small business owners might tell you: Anxiety about making the “monthly nut” often keeps them up at night. Will there be enough positive cash flow to cover recurring costs, such as payroll, suppliers, and utilities? In focusing solely on that nut, however, an owner can easily lose sight of, well, the trees. Without long-term strategies to nurture growth, a small business can wither and die.
Researchers recently examined the performance of businesses that take a long-term mindset versus those with a short-term focus. The results were clear-cut: Long-termers outperformed short-termers on every key measure, including revenue (by 47 percent) and profits (by 36 percent).
That research looked at large, publicly-owned companies whose shareholders often insist on chasing quarterly profits at the expense of long-term sustainability. A small business owner has far greater flexibility to take a more balanced approach and can resist the temptation to think only in months or quarters. Here are four ways to prepare yourself for the pitfalls of short-termism in your business.
Day to day, you have strong processes in place to ensure high-quality customer service. Looking ahead, your focus may shift to what your customers will want in the future. Consumers today seek responsiveness and will quickly switch to a competitor with a more appealing brand or offering, especially if there are low barriers to switching. Tracking market trends, communicating continuously with clients, incorporating their feedback, and monitoring your competitors can help you formulate effective customer acquisition and retention strategies.
Hire carefully and invest thoughtfully in professional development. This includes creating a workplace culture that values performance and risk-taking, ongoing training to help employees develop new skills, and real opportunities for advancement. It’s an investment in your present and future.
You know where you make your money now, but those revenue streams can dry up over time. Consider future-oriented growth strategies that build on your core strengths, such as diversifying your product and service lines, entering new geographic markets, creating fresh uses for existing offerings, developing partnerships with other companies, and tapping into alternative channels to reach buyers.
You built your dream. Now protect its future. The ultimate sustainability play is to ensure the longevity of your business, beyond the time when you are personally involved. Succession planning, which involves passing ownership to an heir or selling the company, is critical. With proper succession planning, small business owners can help to ensure both the long-term success of their business – and greater financial confidence for themselves and their family for years to come.
As always, it’s good practice to talk with a financial professional who can help you create a business succession plan while creating long-term value and sustainability.
For additional assistance with your financial planning contact Missie Berteotti at The Hicks Group, a part of Luttner Financial Group, at firstname.lastname@example.org or 412-398-5030.
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