Sustainable Businesses Focus on These 3 Simple Things
If you’ve been following the money conversations online, chances are you’ve heard about creative entrepreneurs desiring a profitable and sustainable business. And while it’s self-explanatory what a profitable business looks like, sustainability isn’t always apparent.
So, let’s break it down a bit.
What is sustainability?
In a Fast Company article about business growth, one component of sustainability is listed as having a repeatable sales model that you can scale.
When it comes to sustainability, the conversation is most often about sales. In other words, you have consistent leads, consistent sales conversions, forecastable revenue, and positive profit margins. It’s a numbers game where more of one thing leads to more of the other, either in equal or greater proportion.
But operating a sustainable business depends just as much on our expenses as it does our sales. Unless we’re being mindful of the expenses we incur to increase our sales, profit margins will shrink and reduce our sustainability.
So, the question is - how do you achieve sustainable growth when scaling your business? These next three tips will point you in the right direction.
Get to know your expenses.
Our first step toward sustainability should be getting to know our expenses. We need to know how much it actually costs to run our business, because it’s a huge factor in whether or not we’re even producing a profit to sustain. Whether you’re selling digital products or services online, you have the general costs of doing business like website hosting, software applications, subscriptions, contractors and consultants, etc. Product sellers also have costs of goods sold, the cost of materials and labor to produce the finished product for sale. Knowing our expenses provides the basis for this next step.
Shrink your spending.
Next, we need to determine where we can be more resourceful and wise with our spending. Survey general business expenses. Are you getting the maximum benefit from your paid applications and subscriptions? I’m willing to bet that you could trim a little here and not miss a beat in business performance.
Recognizing when we are merely trading expenses for equal sales is an essential component to gaining clarity on our profitability. If spending another $1 in your business only gets you a $1 in sales, that's not increasing your profitability. It's just a trade. You want to earn a return on your investments, not simply break even.
Plan for future expenditures.
Finally, planning for future expenses and investments goes a long way in solidifying sustainability. Set up cash reserves (or savings) for a few months of general business expenses and payroll, as well as for quarterly estimated taxes. Setting these up can be as simple as earmarking the funds in a spreadsheet that tracks your total savings balance or as complex as having separate accounts specifically for these reserves. Give yourself the peace of mind that you’ll be prepared even if you never have to tap these extra resources.
Sustainability for your business means continuity and longevity. It means freedom from worry in the slow months because you’re prepared and equipped with reserves. It also means good stewardship in the flowing months when you’re stuffing your financial cushions. Try implementing some of these concepts in your own business, and I promise you’ll gain a greater peace of mind knowing that you’re building a business that will sustain itself and YOU!
And if you’d like to go further in this conversation about sustainability, we should chat. I do 1:1 calls weekly with creatives who are serious about increasing their profits and maximizing their sustainability.