The one most people think of first. Active levers at your disposal: quantity sold, price, COGS, gross margin, controlling fixed overhead / SG&A, controlling other expenses (interest, taxes, depreciation).
2. Cash flow
There’s a dollar floating around: who has it? You, or someone else? The goal of cash flow is to get that dollar to flow into your business, and the sooner the better.
3. Balance sheet
This gets tricky, because you can make money on both a strong or a weak balance sheet. A strong balance sheet lets you borrow money less expensively, negotiate better pricing, and be more intelligently proactive vs. inefficiently reactive. On the other hand, a well managed weak balance sheet might mean you efficiently generate profit using other people’s money (OPM) in a highly leveraged company, which equals powerful Return on Equity (ROE).
4. Exit strategy
Build your company with an eye toward selling it — in whole or in part — and you’re likely to get a much higher valuation when you sell. This could be worth hundreds of thousands or millions of dollars. If you don’t think your business has significant resale potential, you’re setting too low a bar for yourself. Aim higher. Profitable, cash flow positive businesses with good systems are almost always in demand.
5. Turnkey systems
a la Michael Gerber and his E-Myth logic. Get the company to run without you. Creates short-term benefit (more profit per hour of time you work) and long-term benefit (higher valuation because whoever buys your company will be more confident that the “machine” will work without you).
6. Risk management
If the other strategies here are “offense”, this one is “defense”. You’ve made money, now protect it. Insurance is just the beginning. Diversification, tight contracts, regulatory compliance, financial controls…there are scores of effective, affordable risk management techniques to deploy. The goal here is to avoid unpleasant surprises.
7. Personal investments
I’ve seen entrepreneurs totally neglect the money they’ve taken out of their business; they let it languish earning negative returns (after inflation) in an anemic money market account. Make the money on your personal net worth balance sheet work for you — keeping up with inflation should be your minimum expectation, then go up from there based on your long-term investment plan.
8. Tax planning
Tax planning deserves a special mention, because it’s usually one of an entrepreneur’s top five expenses, totaling hundreds of thousands or millions of dollars over an entrepreneurial lifetime. Think income tax, payroll tax, sales tax, use tax, city business tax, property taxes, estate taxes, and more. Think long-term. Revisit your strategy at least annually with a qualified tax advisor.