Our last several blogs have covered the need for businesses to carefully monitor their financial status and strategize for the future in order to better meet their goals. Too often businesses run with a generic goal of “making money” or “becoming more profitable.” While there’s nothing wrong with making money, this is a short-term goal. If you do not fully understand your company’s finances and goals, you are very unlikely to meet those goals, even if everyone in your company works very hard. In addition to setting goals for profitability, planning for financial sustainability is critical for long-term success and shorter-term peace of mind.
What Is Financial Sustainability?
Financial sustainability is the ability of the company to maintain itself financially over time. Achieving sustainability would involve building up the financial resources necessary to seize opportunities and weather any storms that may pop up over time without endangering the company’s daily operations. A sustainable company is financially robust. It has enough resources or access to capital to take on new risks if they seem like opportunities for the company to grow. It also can survive a few failures or an economic downturn without everyone in the company panicking about how it will meet payroll from week to week.
Planning for Financial Sustainability
As with everything, creating a plan for sustainability makes it easier to visualize the steps necessary, and to take them one by one until the overall goal has been reached. The ultimate goal behind this kind of plan is achieving a business that is thriving far into the future.
Planning is not just improving cash flow or taking in more money. It’s not simply increasing profitability. It also includes increasing the company’s resources or access to resources. This is not limited to financial resources. Attracting more talent to your business, improving its leadership structure, or creating processes and procedures will make the company more robust and anti-fragile.
A plan for financial stability, no matter how well thought out or structured, will not tell you why you are in business. It’s not a mission statement. It’s a way to ensure that your company can remain viable no matter what the future throws at it and can continue with its mission for years to come.
Sustainability does not happen overnight. It’s a lengthy process, just like improving your own personal health or wellbeing would be. If done correctly, you will see many benefits. These would include:
Increased competitiveness in your industry. Streamlining your processes and hiring better talent will over time make your company more efficient to run and far more attractive to customers.
Less panic and stumbling. If you know you have enough resources at your disposal to handle an economic downturn or an unfortunate event, you will be able to make better decisions on your own terms. Better insurance, more savings, or readier access to capital can bring a lot of peace of mind. It’s easier to win any battle when you’re on solid, high ground.
Living out your company’s mission. Mission statements should be more than something to frame and hang on the wall. Why are you in business? Why have you chosen to be in this business? Financial sustainability will allow you to meet goals beyond just paying bills, including serving your community or leaving behind a legacy.
It’s never too soon to start planning, as cliche as that sounds. Your plan gives you an advantage that too many companies don’t have.
Making a financial sustainability plan will require drawing up a document that specifically outlines your long-term financial goals, your financial strategies for meeting those goals, and whatever steps you believe you will need to take to achieve those goals. This will be different for every company. Sustainability is a step beyond financial planning or financial strategy, but it builds on the information and decisions you and your leadership make for those steps. It should include:
- An executive summary
- Financial data
- A financial sustainability analysis
- Long and short-term strategic goals
- Your action plan
- Benchmarks you expect to meet during implementation
- Your budget
If any of the above sounds daunting to you, do not be afraid to consult the experts. At Prometis Partners we have experience helping companies strengthen their weaknesses and position themselves for greater success in the future. It can be difficult to view your company objectively or communicate effectively with everyone who has an interest in it. We are here to help with any of those challenges. Contact us today to discuss financial sustainability or any other concern you have.