What sets growing businesses apart from their biz brothers and sisters whose revenues are flat or falling? Based on a recent study that compared small firms with rising revenues against their counterparts with flat or declining sales, here are the six practices that stood out:
1. Planning Ahead
Business owners who managed to grow in the face of economic weakness were adept at planning for what might go wrong, rather than simply reacting to trouble. When times were good, these well-prepared businesses squirreled away cash reserves and opened credit lines that helped them weather tough times without having to make cutbacks. In contrast, owners with declining revenues found themselves madly rushing to slash expenses as difficulties mounted.
2. Borrowing Strategically
Growing businesses understand that borrowing can be a good thing (especially since interest is tax deductible) if the money is put to good business use. And the use that has paid off best for growth firms is R&D. About 58% of high-growth small business owners report that R&D type investments yielded the most positive returns. On the other hand, borrowing to open new offices, build production facilities or add new capabilities was more likely to correlate with a DROP than an increase in sales. Likewise, borrowing to add staff was generally a money-losing endeavor.
3. Sharpening Management Skills
Professional development also leads to more income. Business owners who improved their skills at strategic planning and money management, for example, had a better chance of achieving revenue growth than those who didn’t. But the most compelling results came from those who got better at hiring the right people. Team building skills, it turns out, are great for boosting a bottom line.
4. Getting Good Advice
Business owners have always relied on advice from friends and fellow entrepreneurs. That never changes. But the best of them also make sure they plug into a savvy accountant or other financial advisors to provide the kind of professional fiscal advice that every business needs, no matter what size. For example, 68% of businesses with rising revenues sought out financial advisors, while only 51% of those with declining revenues took that step.
5. Balancing Business and Life
Revenue-boosting business owners tend not to be all-consumed by their businesses. They’ve learned to balance involvement with family, friends and their communities. In short, they run their businesses – not the other way around. Conversely, business owners whose revenues decline tended to be more fiercely independent and obsessed with their companies at the expense of other parts of their lives.
6. Sharing Vision
There’s also a strong correlation between success (in terms of revenue growth) and business owners who were strong leaders and adept at sharing their vision with employees, colleagues and others. In addition, it was critical for business owners to demonstrate commitment to the business and inspire teams to perform at their highest level.
If you’re not among the ranks of revenue risers, take these six differentiators to heart as you plan your year ahead. By following in the footsteps of success, you’ll have a better chance of increasing revenues no matter what’s happening in the economy around you.
About the Author: Daniel Kehrer, Founder and Chief Content Officer of BizBest Media, is a senior-level leader in digital media, content development and online marketing with special expertise in startups, SMB, social media and generating traffic, engagement and leads. He holds an MBA from UCLA/Anderson and is a passionate entrepreneur (started 4 businesses), syndicated columnist, blogger, thought leader and author of 7 business and financial books.