Being Financially Stable

Small business owners and home service professionals often face a significant challenge in keeping their enterprises sustainable: financial stability. Without stability in your revenue and expenses, it becomes much more difficult to manage your forecasts and expectations, harder to maintain a consistent living, and more stressful overall.

The Benefits of Financial Stability

These are just some of the perks of increased financial stability in your professional life:

One of the most common reasons for business failure is the lack of accurate financial forecasting; stability in your revenue and expenses will give your business greater predictability, so you won’t encounter that issue.

Income consistency. As a business owner, your personal income will depend on the performance of your business. Higher financial stability will mean more income consistency, no matter how your business develops.

Lower stress. Stable businesses are less stressful since they’re more predictable and easier to control. It also means you have fewer unknown variables to worry about.

Financial stability makes your business more flexible; with financial grounding, you’ll have more options for investment, development, and growth.

Practical Tips for Financial Stability

So, what can you do to make your business more financially stable?

Create a second revenue stream. Your first job is to create a secondary revenue stream by selling a different product or service or starting a side business. For example, if you specialize in heating and cooling, you might consider adding a plumbing wing to your business.

If you don’t want to make the investment to a different area of specialty, you can also diversify your income through other means, like investing in stocks and index funds. More lines of revenue mean less risk, and a greater resistance to sudden changes.

Acquire retainer clients. You’ll also want to stabilize your income stream by standardizing what you charge and how you charge it. If you can, enlist customers in an ongoing retainer plan, charging a fixed amount per month for a set amount of work; so long as the contract remains in place, this will give you a firm number on which you can build your forecasts.

You can still take on other kinds of contract work, but a handful of retainer clients can make your business significantly more stable.

Maximize client retention. Speaking generally, customer retention is vastly more cost-efficient than customer acquisition. You’ll spend less time and money keeping your best and most loyal customers than you will finding new ones, so balance your budget accordingly.

Establish customer loyalty programs, and go the extra mile for your top customers, instead of pouring money into more advertising or outreach programs.

Get seasonal and/or on-demand help. During periods of increased work, such as during a specific season or due to an inexplicable surge in demand, you’ll be tempted to hire more full-time employees.

However, the increased costs and high turnover will introduce more instability in your business. Instead, build a network of contacts for on-demand or seasonal help, who you can call in as needed to manage extra work; that way, you won’t have to turn away the extra work, and you won’t have to hire more full-timers either.

This can save you 25-30 percent of your employment expenses for extra help alone.

Have a follow-up strategy. Make sure your business has a follow-up strategy in place for leads that have gone cold, or customers who haven’t purchased anything from your brand in a while.

Sometimes, knocking on a door or making a phone call is all it takes to rejuvenate interest in your brand and reawaken a portion of your income that would otherwise be lost.

Manage your revenue carefully. Manage and spend your revenue carefully. During periods of increased income, you may be tempted to draw a bonus or invest in something new for the business but think carefully before you do; your necessities should always come first, followed by any changes needed to maintain or improve profitability.

Reinvest in your business when appropriate and avoid impulse spending or expansion too rapid for your business to tolerate.

Build emergency expenses into your budget. Finally, make sure you budget conservatively, accounting for emergency expenses and unknown variables whenever possible.

No matter how carefully you plan, unexpected expenses are bound to come up; having an emergency fund on standby will help you compensate for those expenses and prevent them from interfering with your projections.

These strategies take time, effort, and sometimes money to establish, but once built into the foundation of your business, you’ll become much more financially stable.

Once that financial stability is in place, you’ll have much more flexibility, and far more options for your personal and professional future.

Larry Alton

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