How CEOs Can Help Their Companies Grow Robust Reserves
The principle of achieving profit with a purpose encourages business owners and leaders to think differently about money and resources. Unfortunately, some business owners never break through to using profits wisely.
I believe leaders should strive for building robust business savings accounts. In my experience as the chief servant leader of a company that coaches business executives through retreats and other tools, some businesses never consider opening one as part of their holdings. There is a proverb that says, “Four things on earth are small, yet they are extremely wise: Ants are creatures of little strength, yet they store up their food in the summer.” This teaches me the value of putting back to push forward. To manage resources well, the leader should consider what has been given to them to use in their current situation and what they have for future conditions.
Robust reserves can help position a business for growth and expansion. In my experience, cash is king in business, and the first place to keep cash is in a savings account that is accessible. A strong cash position can be helpful to companies in a variety of ways.
1. Set aside savings in case of a dry season.
One key reason to have a robust savings account is to alleviate temporary shortages of sales and profits. Businesses can experience dry seasons when sales are pinched, which drains cash reserves. Business savings accounts are liquid assets. These assets can be quickly accessed to pay expenses that are greater than current receivables. I believe the wise business owner prepares today for the unexpected tomorrow.
You can start your savings by viewing your savings account as another bill that must be paid. Determine a reasonable monthly amount that you could pay each month, and then commit to building robust reserves rather than just adding a new expense.
2. Collaborate with team members to make a plan.
Strategic business leaders help the company think about changes that need to happen so the business can continue to pivot and compete in any market situation. Companies need to know where to put their investments to help their businesses function smoothly. Some purchases and investments can only occur with the strength of long-term savings.
Determine major expenses that the business will occur over a five-year period, and then decide the amount of savings that should be set aside each year to achieve the larger expenditure. In my experience, one idea that some business owners have found helpful is to consider an infrastructure retreat. At these team retreats, employees and company leadership determine the key purchases that will need to be made in order for the business to function at a high level. These retreats can help bring clarity and unity about the order of expenses and help to develop a strategy of how to save now for future benefit.
3. Account for what you would need in a recession.
There is a business axiom that I believe many growth leaders have embraced: Even in difficult economies, there are growing companies. Some companies can grow significantly during difficult financial times because they have set aside the resources to not only survive but to expand. During down economies, I believe the opportunity to acquire lower-performing companies or companies on the verge of closing can help propel cash-flush companies forward to greater growth and expansion. Additionally, companies that have strong cash positions can invest wisely in marketing or in making key purchases of critical supplies at discounted prices, which will help the company build a solid foundation.
4. Set enough aside to give back.
It is difficult to give money to others if you do not have it. In my experience, many businesses miss out on opportunities to be blessings to employees or communities because they use all their resources on themselves. But I believe companies should work diligently to develop their brand generosity. If your business is having a good year, at the right time, you could give to something that could make a significant impact on someone else. Remember, you can’t give if you don’t have. Companies should be concerned about conscious capitalism and being good partners in the communities in which they operate. Try sponsoring a local nonprofit or supporting a local community cause.
Profit with a purpose can challenge business owners and leaders to look at their resources differently. One such area is the focus on a business savings account. Companies that develop the habit of growing robust reserves will find that there are many beneficial reasons for businesses to put back a portion of their profit with a focus on the future.
Originally published at www.forbes.com on January 3, 2019.
