What makes a new business financially sustainable?

Sustainability’ has become a buzzword today. You might have come across terms such as environmental sustainability, social sustainability, and financial sustainability. But do you know what is sustainability in business and how to build a sustainable business? Well, the financial sustainability of a business refers to its ability to catch up with the working capital requirements without impacting revenue generation. 

To build a financially sustainable business, you must develop resilience, that is, the ability to bend without breaking and adapt regardless of what you encounter. Read on for some tips that can help you maintain the financial sustainability of your business. 

Create a robust business plan

It is a no-brainer that every business requires a business plan to succeed. A good business plan not only helps you take the necessary steps required for the success of your venture but also enables you to achieve your short-term and long-term business objectives. Without a business plan, a business tends to sail aimlessly, like a rudderless ship.

That is why the first thing you need to do is create a robust business plan. You should know what to do, how to do it, and when to do it. Prepare a roadmap of at least five years. Create your targets and pen down how you’re going to achieve them. 

Aim to build financial resilience

Developing a measure of financial resilience is the first step toward achieving financial sustainability. This refers to the ability of your business to generate revenues without an infusion of outside capital. As far as possible, you must try to run your business with your own funds. Because when you avail of funding from an outside source, you may either have to start paying interest or sell your equity ownership.

Moreover, borrowing too much capital may lead you to bankruptcy if your business fails to perform as expected. Try to figure out how long your business can survive without constant capital injections. The greater financial resilience you build, the greater will your business’ financial sustainability. This is only possible when you have a great business model with appropriate financial planning.

Maintain appropriate profitability

One of the toughest challenges small business owners face is setting up their profit margins. If you set up a high profit margin, you could lose your customers to your competitors with low profit margins. On the other hand, setting up a low profit margin would leave no room for seasonal fluctuations in revenues. So, achieving a balance is crucial while deciding on your profitability. There is no harm in seeking professional help if you are unable to figure it out by yourself.

Conclusion

Following these tips can help you maintain the financial sustainability of your business for a long time.

Somewhere during your journey, you will require outside funding, and this is where you need to be extremely careful. Go for external funding only when it becomes absolutely necessary, and ensure that you choose an appropriate source.

For example, you can apply for an IDFC FIRST Bank Business Loan of up to Rs 1 crore and fulfil all your working capital requirements with ease.

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.