When first starting your business, it’s reasonably easy to understand how much money is coming in and going out, and the ways to increase business are obvious.

As your business grows, so do expenses and the number of tasks you have to take on and oversee as a business owner. Even as you delegate jobs and hire new employees to help grow your business, it’s easy to get caught up in the daily operations. The risk in doing this is losing sight of your long-term goals to build wealth for you and your family.

Here are 6 wealth building tips that will ensure you’re getting the most of all the hard work you are putting into your business.

Be Intentional About Exactly What You Want to Build, How, and Why

As mentioned, ignoring your goals or not creating any is a sure way to waste resources and miss opportunities.

Situation 1: You have no intentions of selling your business. You envision growth, profitability, and wealth in the years to come. Do you know what drives value in your business? Do you know what detracts value in your business? How do you plan on driving growth, profit, cash flow, to maximize value as a foundation for your wealth when you don’t know where you are currently and where your business is going?

Situation 2: Let’s say you have no intentions of selling your business in the next 5-10 years, but you are forced to sell or exit, as there are unforeseen factors that affect your business and its future. Do you know what your business is currently worth? What will your business be worth in 5-10 years? How do you accelerate that growth and then translate it into value?

How you operate your business needs to be in line with your goals. Know what you want to achieve, and then take intentional steps to reach those goals.

Stop Tracking Vanity Metrics

‘Ignorance is expensive.’ That motto is important to understand in order to achieve success as an entrepreneur.

By vanity metrics, I’m referring to hollow numbers that don’t affect your bottom line. For example, our founder Frank Lunn’s previous business was bringing in $20 million in annual revenue. While the majority of time went into increasing this, it was all for show.  The actual business wasn’t nearly as profitable, and he should have focused on what would build his wealth and the foundation of the business – profit! 

Frank’s ignorance was expensive. What he didn’t know about his margins, his processes, and how those were all intertwined cost him dearly. Don’t let your ignorance be expensive.

Keep track of the metrics that get you closer to achieving the goals that actually matter.

Optimize Your Profit Margin

A metric that is important to every business, regardless of their goals (unless their goal is to lose money), is profit margin. Profit margin is the amount of revenue left over from sales after accounting for costs.

For example, if you buy bike frames for $100 each, spend $100 in additional parts to complete them and then sell for $1,000, your profit margin is $800 (not taking into account other expenses or pay, which should be included in profit margin).

Imagine you sell 1,000 of these a year. Let’s say you can reduce your variable costs by buying all of the frames in bulk and they are now $85 instead of $100. Your profit margin is now $815, and for the year, you’ll make an additional $15,000 in profit.

By just making a small change in your profit margin, it can make a huge difference in your profitability.

For more on profit margin, check out our video tutorial: Increasing Business Profits Using Gross Margins: Accounting Clarity for Entrepreneurs Series.

Plan Out Bite-Sized Chunks

Bill Gates didn’t get a computer into every household in a year. Even if you are trying to build a massive empire that will change the world, you need to plan short-term goals, which can act as steps towards what you want to accomplish in the long-term.

If you want to build a $100M business, you have to get to $1M first, and then $10M, $50M, etc. Start with planning out how to get to your short-term goals and pursue them relentlessly.

Master Your Cash Flow

The definition of failure in business is running out of cash! Mastering your cash flow will dictate how and when you can use your cash for business growth.

In 2014, we did a special webinar with the author of Never Run Out of Cash, Phillip Campbell. Watch the full webinar,  How to Understand Cash Flow, here!

Have an Accurate and Flexible Financial System in Place

Your financial reports, profit margins, cash flow, and important business metrics all rely on one thing – having an accurate and flexible financial and accounting system in place. If your bookkeeping and accounting aren’t set up properly, anything that comes out of it could be unreliable and put your business at risk.

Kahuna Accounting works with growth-minded businesses and entrepreneurs to set up and manage their financial system. We’d like to welcome you to read our free guide on cleaning up your accounting mess.  Access it here!