There are more than 5.6 million small businesses operating in the UK, with these entities playing an increasingly influential role in driving economic growth. In fact, SMEs currently account for 60% of all private sector employment, while delivering a combined annual turnover of £2 trillion.
The economic climate in the UK is increasingly volatile, however, and this means that new or burgeoning businesses must make informed financial decisions if they’re to succeed.
Below, we’ll look at the smartest financial moves you can make as a newly flourishing business, while considering the importance of informed fiscal advice.
- Know your Net Profit Figure
If you’ve ever watched the hit BBC show Dragon’s Den, you’ll know that a surprising number of entrepreneurs forget their company figures under intense questioning.
This includes their previous and projected net profit figures, which relate to the single most important metric for any aspiring entrepreneur with growth in mind.
Your business’s net profit indicates its bottom line profit in relation to total sales, while it’s important as it offers an insight into the health (or future health) of your venture and showcases the ability of a company to increase margins even as turnover declines.
Whether you want to entice investors or simply secure a loan from the bank, having a firm grasp of your firm’s net profit figure will prove central to your success.
- Strive to Achieve a Positive Cash Flow
The term ‘cash flow’ is another one that’s central to the success of your business, as it relates to the volume of capital that’s going into a company from regular operations over a specified period of time.
Without positive cash flow, you’ll run the risk of being unable to pay your bills, while this may even prevent you from taking on additional work and retaining a motivated workforce.
This is why innovative lending measures such as factoring have become so popular among smaller businesses, as they enable firms to sell their accounts receivable and essentially receive an advance on completed work that’s bound by 30, 60 and 90-day repayment terms.
This can empower your business’s early stage growth, while helping you to retain as much of your equity as possible.
- Borrow and Invest Wisely
The issue of equity is an interesting one, as while you may need to borrow capital to fund your venture you should try to retain as much of your original stake holding as possible.
This requires you to borrow wisely, in relation to the precise amount that you need and the terms of any agreement that you enter into.
Similarly, you’ll need to be wary about the type of investors that you engage with, while it’s always preferable to borrow against a proven concept and business model rather than one that’s unheralded.
In terms of investment, we’d recommend seeking out expert financial advisors such as Downing.
This will help you to leverage any knowledge that you have and identify the best potential markets, while also offering you access to tax savings exercises that optimise the value of your funds.