There are two important steps every company should do before growing: (1) Run a breakeven analysis and (2) Line up the cash before you grow. The first prepares you to profit from growth; the second prepares you to fund the growth.
There are two important steps any company should do before growing:
Run a breakeven analysis. A breakeven analysis calculates the revenue increase you need to cover the expense increase of the growth (i.e., how much revenue you need to “breakeven”). You can then evaluate whether you think that “breakeven” revenue increase is reasonable. You may find that you would have to grow revenue much more than you think.
Line up the cash before you grow. Growth usually takes cash before providing cash. One of the biggest mistakes companies make is growing their expenses before they have the capital to handle growth. You can't rely on payments investors may make, loans you may get, or huge sales increases that may occur. You need cash in the bank to make sure you can cover the rising bills as they come in. Lock in the funding first; grow second.
I wish you both profits and cash from growth. I wish you well.
- Rob Stephens
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