Wrap the Year Up with Focus on the Long Game
As another challenging year comes to a close, all signs point to more bumps in the road in 2023 – at least for the next quarter or two.
So what can you do to position yourself for weathering another period of havoc, especially now that annual tax and budget planning is (hopefully) behind you?
As a firm that differentiates its services with a holistic approach to help small to mid-sized businesses grow and thrive, it’s no secret that our recommendations are built around diligent planning.
You can’t go wrong with spending time at the end of the year on long-term thinking – no matter what is ahead in the short term.
When you use your long-term goals to revisit and refine your short-term strategies, you’ve got a roadmap for getting where you want to go.
It’s All About Your Margins
While end-of-year planning is generally focused on the coming year, a good strategy includes working from a longer-term view:
- Where do you want to be in five years?
- Where do you need to be in three years if you’re going to reach that five-year goal?
- What needs to happen in the next 12 months for you to have any shot of getting to where you need to be at the halfway point?
Your focus should be on profitability and the financial modeling needed to understand where true profitability lies.
If you want to grow from a $5 million business into a $10 million business. Great! To see that happen, you must plan and financially model how to get there. What needs to happen in the next 12 months if for you to reach your goals in five years? Are you offering the right mix of products and services to grow to that level?
Working alongside an accounting partner focused on your goals can help you create a clear path between where you are and where you want to be – and ensure that your financial model is aligned with that long-term goal.
Does your goal to double in revenue require an increase in staffing or to add equipment or additional facility? The answer is most likely “yes”. If you are not watching, revenue growth can cost you more money and it is easy to get caught in a profitability trap where you’re not growing the bottom line.
Rightsizing: Three Ways to Improve Profitability without Adding Staff
It’s not an easy time for growth-minded strategies that depend on hiring. But it’s a great time for exploring ways to grow profits without additional staff.
The end of the year is a great time to right-size. And one of the cornerstones of rightsizing is optimizing the type of clients to target and nurture.
The more precisely you can identify your ideal customers, the better you can match existing staff to meet their needs in the most efficient way possible.
Do you have a plan to nurture and care for new clients? Do you have legacy clients whose prices have never been raised? If you don’t have the ability to hire, it may be time to cut unprofitable clients and review your pricing strategies.
Here are three ways to increase profitability without adding more staff:
- Shed Unprofitable Clients: identify and divest of clients that are bad for business, even if they’re good for revenue; a customer who brings in significant revenue but requires too much work or drives away good employees is a profitability threat
- Clone Your Best Customers: take the time to determine who your ideal clients are – clients who value what you do and are easy to manage; go find more customers like them
- Optimize Productivity: identify inefficiencies and redundancies in your workflows, especially when your staff spends too much time on non-billable/value-adding activities
The Roadmap: Plotting the Right Course to Your Goals
The combination of a long-term plan and solid financial modeling is a far better strategy than merely chasing revenue.
A roadmap built in partnership with a holistic CPA partner will help you identify your ideal clients and avoid the roadblocks associated with a strategy built around revenue.
Your financial roadmap can also help you:
- Determine the amount of income you want to pull out of the business
- Plan for staffing for the right price
- Take steps to retain key employees
- Clarify long and short-term goals
- Confirm cash flow and the steps needed to sustain and grow it
- Unlock ways to optimize performance
- Refine your pricing strategies
- Prep for the eventual sale of your business, which will maximize your profitability and cash flow
A skilled accountant can act as a GPS on your financial journey, helping you create effective strategies, establish KPIs and benchmarks, and course correct to ensure you are moving on the path to your goals.
At Kirsch CPA Group, we are committed to the success of your business on your terms, and to the financial due diligence required to get you there.
Sign Up for Email Updates
Share This Post
Accounting & Financial News
Overcoming Stagnant Growth: Strategies to Break Free From a Business Plateau
Plateaus are a normal event in the life cycle of any business, but that doesn’t make them any less frustrating.…
5 Ideas to Help Small Business Owners Reduce Taxes for 2023
As year end approaches, small business owners should review their tax situations to determine ways to lower…