So you own a business, and it’s actually making money. Congratulations — you’re doing much, much better than many small business owners out there. So, what comes next?
Building for the future. The success of your business is great, but it’s not guaranteed forever. It took a lot of creativity, hard work and relentless commitment to get where you are today; it will take that much more to continue to thrive in the years to come. If you want to succeed in the future, you’re going to have to build on all of the things that you’ve done right so far.
In this series, “Business Wisdom,” we’re looking at how godly principles of personal finance also apply to our business decisions. We’ve discussed controlling your expenses, using a detailed budget, growing carefully and saving money for emergencies. Today’s lesson is a lot like the last one: For long-term success in business, we have to use the money we have today to build a solid foundation for tomorrow.
Think of a newly successful entrepreneur like a young professional in his early 30s. After toiling through his 20s to find his calling and start a career that he actually enjoys, he’s learned a lot, grown a lot, and has begun to earn the respect of the people around him. With those new skills and responsibilities comes an income that he can actually live comfortably on. Though it would be tempting to go out and blow all of that extra money, it’s actually the worst idea possible. As a young professional, he’s at a critical point in preparing his financial future. In order to be prosperous later on in life, the best thing that he can do is to start saving and investing now.
A successful business owner has a lot in common with that 30-something worker. No business succeeds instantly when it first begins. It takes some time, some tough lessons, and a ton of sacrifice to get to a place where the business is capable, respected and profitable. For many business owners who have worked overtime for years to get to this point of profitability, it can be incredibly tempting to relax, to coast, and to start cashing checks. But that’s a short-sighted strategy: Just like the young professional must start investing in his 30s in order to retire well in his 60s, a successful business owner must use today’s profits to invest in tomorrow’s business.
“Wait,” you say. “I have a successful formula. I’m making money steadily. And my business practically runs itself. Why should I not treat myself to all of the profits?”
Because nothing is ever guaranteed in this world, especially in business. We’ve written before about the myriad things that come from out of the blue and make a dramatic impact on your bottom line. New competition, new expenses, new technology, new government regulations or new consumer preferences can steer your future straight out of your control. Sometimes businesses are so successful for a while that they never change; after a time, because they never changed, they quit being succesful.
There’s nothing that you can do to completely insulate your business against the storms of this world. But perhaps the best thing that you can do is never to take your success for granted. You may be king of the hill right now, but one day, something or someone will challenge you. And the only way to make sure that you keep winning is to keep building a stronger business.
Building your business for the future can take a lot of different forms. Certainly, you should be re-investing some of your profits into maintaining your business, because things break, equipment wears out, employees quit and they all must be replaced. But maintaining the status quo will hardly keep your business going into the future. In addition to using some profits to maintain the business, you need to re-invest some profits to grow the business.
What you do to grow the business will have a lot to do with what kind of business you’re in. Marketing is certainly a good first step: You may have a good customer base now, but those same folks won’t be around to buy from you forever. In order to keep your business healthy and growing, you need to be constantly reaching out to new customers. And that takes money.
If you’re involved with bringing products to market, you should be re-investing some of your profits into creating new products that can reach new market segments. Research and development can be expensive, but the cost is well worth it. At a certain point, the market is going to reach a saturation point with your current products, and the sales of what you offer now will level off. If your business is going to grow and succeed for the long term, you’ll have to have new products that will bring in new customers.
Finally, it can be incredibly beneficial to invest in human resources. Many entrepreneurs begin as bootstrappers, single-handedly doing all of their companies’ sales, production, billing, record keeping, etc. There are a lot of benefits to being a one-person show, but eventually this will hold you back. One day your business will reach a point where you need an employee. If things go well, you’ll eventually need five, 15, 50 or more. These teammates can add a lot of value to your business in terms of new ideas, new energy and new horsepower. But for many business owners, hiring is incredibly stressful, because they’re not sure how they’re going to pay a second salary.
Wouldn’t it be great to have enough money set aside to pay for a whole year of an new employee’s salary before they start their first day? How awesome would it be to expand your brand by offering new products and services before your competitors think of them? How about mounting a marketing campaign that will reach thousands of new customers in your area?
If you use today’s profits to prepare for tomorrow’s success, these things happen. Getting there will take discipline, though. By all means, congratulate yourself for the success you’ve had so far. And then put that money to work building a better tomorrow.
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Photo by Jean-Pierre Dalbera. Used under Creative Commons License.
