Seven Smart Financial Decisions That Will Grow Your Business
Manage your finances and cash flow carefully
Making intelligent, informed financial decisions is the best way to keep your business running smoothly and profitably. Businesses are very much like fine-tuned machines: each complicated part must be developed independently, but they must work well together to deliver consistent, long-term results.
To keep your HVAC business from running on empty, you must manage your finances and cash flow carefully. While it may take years to grow your business into one that is truly lucrative, you can take steps toward that goal by paying attention to some key ideas along the way.
Make a Plan for Success – or Plan to Fail
As soon as possible, make a strict commitment to devise a mission statement, a business plan, rules, policies, and procedures. This written or computerized manual is your safeguard in the event of a disgruntled client or employee causing litigious issues and it will go far in a courtroom should matters escalate to that point. The manual can and will allow for amendments, addendums, and alterations as your business grows.
When it comes to business development, keep in mind that you’re seeking a fair business share for your geographical region. It is possible to have too many customers, a situation which can be as harmful as having too few. Once you’ve conducted a market analysis and determined that the region will support you and your HVAC competitors, now is the time to put that research to action and maintain the bottom-line requirements to run a business.
Analyze, Measure, and Balance Expenses
First and foremost, know your cash flow. Many HVAC contractors can estimate cash flow from experience of prior years and projected expenses. Even if you’re bringing in revenue, you can be caught off guard if your projections don’t match up.
There will obviously be certain jobs that have higher expense margins than originally expected; snafus will occasionally occur. Therefore, it is critical to mentally and empirically balance low-profit jobs and high-profit jobs to come to an economical balance where one makes up for the other. This is where graphic expressions of costs and expenses can come in handy. If you can’t hire a fulltime bookkeeper, moving your financial data to cloud-based software should be an early item of business. With the right accounting tools you can keep score of key performance indicators and keep an eye on your finances no matter where you are - a highly impactful benefit.
Be Credit Smart
Entrepreneurial HVAC contractors must also grasp the fundamental importance of business credit. It is imperative to build creditworthiness so that your company has enough capital to continue a path towards growth. Consider working with a local credit union. Understand when and how to use business credit cards, and maintain the accuracy of your credit report by watching closely for erroneous filings.
Furthermore, it's critical to separate personal funds from business funds. According to Carlos Guaman, CEO and founder of business firm, El Triunfo, “Don’t ever mix yourself or sacrifice your personal income for the business,” says Guaman, “this is the biggest and most fundamental mistake that most new businesses make.”
Adhere to Accurate Estimates
When a consumer goes into a store to shop, one of the first things he/she looks at is the price tag of a product. Services are truly no different. Businesses who offer free and honest estimates and then adhere to them have much to gain from the resulting positive consumer feedback.
Although there is some cost involved in providing estimates for potential customers that ultimately don’t hire you, most clients are not likely to hire a service provider in the first place without a cost estimate. Providing accurate estimates will become easier as you gain experience, and as your business grows.
It's imperative to know just how much of your income is generated from each marketing dollar spent. Without keeping track of ads - online and offline - and accounting for how much revenue each marketing channel generates, you’ll be in the dark when it comes time to decide how to continue targeting customers.
The emergence of social media has created many new opportunities for low-cost online exposure - try platforms such as Yelp, Home Advisor, or Angie's List; use benevolent fundraisers to spread the word of your business integrity. Client referral programs are another winning option; it’s prudent to offer a cash or service incentive to a current customer when they refer someone new to your company.
Savings and Investments
Once your profits are comfortably in the bank, it’s up to you to determine how to maximize their continued growth. Become well acquainted with the nature of investments; from CDs and money markets to stocks and bonds. You’ll need to understand when it’s best to invest your profits, and when you should be funneling that money back into the business.
Pass the Baton
Effective business owners and managers have one major characteristic in common: they’ve learned to successfully delegate tasks to their downlines and crew. Avoid getting caught up in mundane tasks such as answering too many emails and phone calls; a successful business owner can keep an eye on the bigger picture while delegating these tasks to an efficient administrative assistant. This process requires the hiring and training of staff, but it will be time well spent. Although you hold the final reins to any financial decision, your staff can usually handle the tasks that lead up to when a decision hits your desk.
Another very supportive online guide to getting your HVAC business off the ground can be found here. Keep in mind that the path to success as a small business owner is a bumpy one, and all companies experience “growing pains” sooner or later. Know that it is all about the climb - now free yourself to go forth to greater things.
Publication date: 11/6/2017