Operate with Financial Fitness

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Just as becoming physically fit accrues tremendous benefits, so does making your business financially fit. Whether your business is in a start-up, growth, comfort, or turnaround stage, fiscal soundness is critical to your success. Here is a set of winning strategies for operating as a financially fit firm.

Diversify your income stream. Avoid depending on any one customer or industry, deriving no more than 15% of your business from any one client source. While it is tempting to grow quickly by becoming a large service provider to a small number of customers, this strategy can make you vulnerable to pressure from those same customers.

Keep overhead low and costs in check. Avoid the good-times syndrome: having high expenses when times are good, then having a difficult time cutting back when you hit a lean cycle. Constantly scrutinize margins, cash flow, and receivables and evaluate the need for every purchase your business makes. Be mindful of unwarranted increases in operating expenses, too.

Budget and build up a cash cushion. 90% of small businesses don't have a 12-month budget. You'll need one in order to protect the fiscal health of your business. Build up a reserve that's equivalent to several months' overhead expenses; you'll find these numbers in your budget. A stash will enable your business to remain intact during a cash flow drought.

Copyright © 2000 Kimberly Stansell. All Rights Reserved.

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