Financial Strategy: for business growth

26 March 2024

• Business Services

There is no single or simple way to grow a business. Instead, business growth demands innovation, commitment, and strategic financial planning. Whether you’re a business owner, start-up, director, or entrepreneur, as you advance your operational processes to expand, you’ll also have several pivotal financial areas required to ensure sustainable growth.

Here at Magma, we understand the significance of financial health and strategic investments in accelerating your businesses growth. We’ve brought focus to key financial strategies that could help you implement continuous growth of your business whilst retaining financial health.

Developing a strong financial strategy

Any growing business requires a well-defined financial strategy, starting with clear financial goals and actionable steps needed to achieve them. Financial goals could include increasing revenue for the business, increasing income routes into the business, establishing new markets, or improving financial profit margins.

To accomplish this, you’ll need to:

• Understand the market
  • Market research will help you identify trends and opportunities and make you aware of any potential challenges within the market.
• Create a long-term plan
  • Keep on track by planning for the long-term. One-, three- and five-year financial plans that include revenue forecasts and investment strategies.
• Establish financial KPI’s
  • Key Performance Indicators (KPIs) can help you track your progress and growth. These can include profit margin, cash flow, and working capital.

Efficient tax planning

For a business to retain more earnings, and invest in growth opportunities, effective tax planning is essential.

Key strategies for tax planning includes:

• Utilising available tax reliefs and credits
  • Research reliefs such as R&D tax credits. These can reduce tax bills substantially.
• Understand business obligations
  • Be aware of changes and updates in tax laws and necessary financial deadlines in order to avoid penalties.

Business performance analysis

Regular analysis of business performance illustrates financial health, highlighting areas that may need improvement or development. Business performance analysis can include reviewing sales figures, cost management, profitability, ad comparing actual and predicted performance.

For a comprehensive analysis, you should:

• Conduct a SWOT analysis
• Analyse financial statements
• Monitor customer and client relationships.

Maintaining financial hygiene

Retaining accurate records, adhering to budgets, and managing debt effectively are all factors that need to be considered to maintain financial hygiene.

Key measures for maintaining financial hygiene are:

• Keep meticulous financial records
• Implement strict budgeting
• Manage debt wisely

Cash flow management

Positive cash flow guarantees you have enough funds in your business to pay expenses, purchase inventory, and invest in growth opportunities.

Key measures to managing your cash flow effectively:

• Reduce trade debtors
• Negotiate better payment terms to retain cash for longer (without compromising supplier relationships)
• Manage and balance your inventory to meet demands (without excess)

If you’re looking to invest in growth, or looking at funding for growth, we can help you prepare your business plan, financial valuations and documents needed to help a business apply for the correct funding, as well as providing you with the expertise required to make informed financial decisions that propel your business forward.