Business owners have to accept that running a business comes with its own pressures. From dealing with the hiring process and training employees to the production process and marketing, there are a lot of tasks a business owner has to take care of or watch over throughout their company. It’s important to navigate these pressures to ensure the ultimate goal, which is normally a better business bottom line. That means having a finger on the pulse of your financials at all times, so you can make sure you’ll always have control of what’s happening next. To avoid making financial decisions that could potentially lead to disaster, it’s important to think both short term and long term about your business’s finances.
That’s because successful businesses consider the bigger picture, which is necessary to remain competitive. You’re probably aware of the statistics about the number of businesses that have to close their doors in the first five years. To help you keep your doors open for as long as possible, let’s look at the dynamics involved with short-term and long-term financial planning and how you can balance the two as a business owner.
Thinking About Short-Term Business Financials
When your business is still establishing itself and preparing for more growth, short-term financial planning is what sets the groundwork for future success. By solving immediate problems and developing strategies that will pay off later, you can ensure better results down the line. Doing so will also make you feel a lot better when making any decision. The key is to set reasonable goals with enough flexibility to adapt to changing business environments.
One of the top benefits of focusing on short-term financials is that it can help you keep track of revenue and cash flow issues. For instance, if you have a revenue target to reach within a year, you have to come up with strategies, such as marketing to a wider audience and increasing your workforce to boost fiscal growth in the immediate future. All of this may sound overwhelming, especially when you’re dealing with other parts of your business, but with short-term thinking, you can make it happen.
Additionally, constant cash flow matters to smooth business operations, so focusing on short-term financials helps you iron out any gaps that may potentially affect your long-term financial goals. Other activities you have to focus on when planning short-term business financials can include choosing the ideal business structure, finding sources of funding, and figuring out your short-term budget.
These are the things that you have to do in the short term, but they obviously have an impact in the long term. For instance, when choosing a business structure, the structure you choose will impact your daily operations, tax expenses, and how you run your business. In that case, consider hiring a small business lawyer who will help you make short-term decisions that are ideal for your business and can set it up for success in the future.
A small business lawyer can provide a wide range of services that can benefit you in the short term. Overall, they’ll help streamline your business activities to get your venture off the ground as soon as possible. Another benefit of thinking about short-term financials is that it helps you stay in control over your business in its most vulnerable phases, no matter how many years your business has been in operation.
With short-term cash flow budgeting, you have to consider the next one to three months of your operations to ensure your business stays liquid enough to cover all debts. This minimizes the risk of losing your business before it even gets a chance to take off, which is something any smart business owner should take advantage of.
Now, let’s take a look at the other side of business thinking, long-term financials.
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Thinking About Long-Term Business Financials
Once short-term goals have been established, don’t just stop there. It’s time to also think about your long-term business financials. Why is long-term thinking so important for business owners? Short-term financial planning alone is not enough to ensure you achieve your company’s mission. Besides thinking about the next one to twelve months, you also have to think as far back as the next decade. You may not know where your company will be in 10 years, but if you focus on long-term financial planning long enough, the answers will become apparent, and you’ll be ready for whatever comes your way.
There are several ways you can effectively plan your business’s finances for the long term. For starters, if you have already hired a small business lawyer to help with the short-term side of things, keep them around because they can also help you plan for the bigger picture. An experienced small business lawyer can help you set SMART long-term financial goals, which are specific, measurable, attainable, relevant, and time specific. They will help you develop long-term financial goals that are in sync with the existing short-term goals you’ve created. It’s crucial for your business not to neglect long-term cash flow forecasting to ensure you make well-informed decisions that benefit the future of your business.
One of the biggest benefits of having a small business lawyer by your side is that it prevents you from having a short-term mindset, which can cost you down the line. Such mistakes include doing things like classifying employees as independent contractors and failing to separate your business assets from your personal assets. These tactics may appear to work in the short term, but the repercussions are not worth dealing with. For instance, if you save on taxes by paying employees as contractors, you risk getting on the wrong side of the legal system and dealing with an expensive lawsuit that could hurt your business’s financials. Getting competent advice from a small business lawyer can help you make all these short-term financial mistakes while steering you in the right direction in the future.
Factors That Affect Your Short and Long-Term Financials
If you want to get both your short and long-term financials right, you also have to think about the factors that influence these two things. One major factor is the quality of your workforce. Since your workforce is also one of your biggest assets, it’s crucial to ensure you focus on creating a high-quality workforce of skilled and talented individuals. Not investing in a quality workforce in the short term might save you money, but it can also get in the way of your long-term goals, which isn’t good. Make sure your business is well staffed because, after all, you can’t do everything yourself. You don’t want to deal with the stresses of having an understaffed company, especially during a busy time of the year.
As a business owner, your attitude plays a big role in your ability to balance your short and long-term financial goals as well. For instance, you already need to have a deeper understanding of business fundamentals so you can allocate resources efficiently to address short-term issues and establish a more financially healthy company. This is important because you can only confidently invest in the long term if your company has strong finances.
Your attitude and that of your investors also determine whether you’re more focused on maximizing short-term profits to the detriment of long-term growth. Even if you’re a new business, the greater focus may be on the short term because you’re restricted by a lack of financial resources, but you still need to have a long-term mindset. In that case, keep doing what you can, and as the maturity of the business increases, you’ll have more room to think about long-term financials. Keep them in your mind from the beginning because they are just as important as short-term financials and can you keep control of your business.
Plan both short term and long term for your business!
Balancing Long Term and Short-Term Financials
The key takeaway here is that long and short-term financial planning are both beneficial for your business. After all, you can’t think about where your business will be financially in the next 10 years without thinking about whether your current financial needs are being met. At the same time, you also have to be aware of how the financial decision you make now will impact the long-term health of your company. You have to develop a balanced approach. The best tips for doing so include working with a small business lawyer and not having a short-term vision only. For example, you shouldn’t be too focused on quick wins because this can hurt your business in the end. You should also make sure you define both your short and long-term goals and ensure they complement each other well.
Closing Thoughts About Thinking Both Short and Long Term for Your Business’ Financials
Now that you have learned about the importance of thinking both short term and long term, financially speaking, start to develop the right strategy to balance your approach today. Starting as early as possible can help you reach your goals sooner and can make you feel a lot better when issues arise. No matter what kind of business you run or how long you’ve been in business, short and long-term thinking are beneficial for any business owner.
Growth Hackers is an award-winning digital marketing and growth hacking agency helping businesses from all over the world grow. There is no fluff with Growth Hackers. We help entrepreneurs and business owners think both short and long term for their business’ financials, generate qualified leads, optimize their conversion rate, gather and analyze data analytics, acquire and retain users and increase sales. We go further than brand awareness and exposure. We make sure that the strategies we implement move the needle so your business grow, strive and succeed. If you too want your business to reach new heights, contact Growth Hackers today so we can discuss about your brand and create a custom growth plan for you. You’re just one click away to skyrocket your business.
