Building a sustainable business

You may not have hundreds of passengers’ lives in your hands, you do have people counting on you. Your customers, your team, your vendors, your family. So why run your business without a clear financial plan?

Many business owners say they have a plan: they’re hiring, growing and working hard. But when asked simple questions—What were your sales last week? Who’s your most profitable customer? What’s your cash burn?—they’re not sure.

That’s not laziness. It’s a lack of systems. Without clear financial tools, you're flying by gut instead of data—and that can cost you.

They have no scoreboard.

The problem: the chaos behind the growth

Three years ago, Smiley Aesthetics had blown up overnight and they were growing faster than they could keep up. They needed an infusion of capital, but they needed better data to tell their story to potential investors. They weren’t sure where their revenue was coming from. They didn’t have a good handle on their margin. And they weren’t sure exactly how much cash they should be seeking. Why?

Because they didn’t have the right financial tools in place to manage their business. They hadn’t seen financial statements in months. And they had a bookkeeper who performed basic data entry, so even if they had received their financial statements, the reports wouldn’t have provided any real answers.

The pivot: building the right systems

They recognized that they had outgrown their current systems and they sought help. The company’s revenue growth was explosive, which they knew by looking at their spa management system and deposits hitting the bank. However, they had no way to review where that revenue was coming from. With multiple lines of business, they didn’t know if their physical brick and mortar locations were performing well or if they were doing better with their mobile business.

With multiple service lines, requiring different levels of staff involvement, product costs, and operational expenses, the owners had no way of knowing what their margins were for each line of business. Further, their product costs were not being properly tracked to inventory, so they had huge swings in margin each month based on when product purchases were made. Without understanding their costs, they had no idea if they were charging enough for services.

The cash burn wake-up call

The company was burning through cash—fast! But, they didn’t understand what was driving the increase in cash outflow each month.

Smiley recognized that their success could be the very thing that drove them out of business, and they took action. Implementing financial systems that would measure their performance and guide them in their decisions.

Every business should have a few key tools in their financial toolbox for sustainable success.

Timely reporting prevents costly mistakes

Even the most accurate data loses value if it isn’t timely. Reviewing January’s numbers in June means you've missed the chance to course-correct months ago. Margins were off? Now they’ve been off for six months. Expenses out of line? You’ve been overspending without knowing it. A year-long revenue decline? Now it’s a year and a half.

Do not let your reporting fall behind. Regardless of who is responsible for your financial reporting, set clear expectations regarding deliverables and timing. Relevant reporting will vary by industry and your volume. You don’t need to review daily sales reports if you complete 3 large projects per month. However, if you complete thousands of transactions per day, you won’t want to wait until Friday to see if there was an issue with your website traffic on Tuesday.

Figure out the best schedule for reviewing data based on what drives your business and set your deliverable schedule accordingly. Here are some examples that might be a good fit for your business.

Daily:

• Daily sales by location
• Daily cash balance

Weekly:

• Weekly sales report by category
• Weekly cash flow forecast
• Weekly invoicing sent
• Weekly bills paid

Monthly:

• Monthly gross margin reports
• Monthly job-profitability reports
• Monthly and year to date profit and loss statement
• Balance sheet

Smiley implemented weekly recaps—including sales activity totals, a 12-week cash flow forecast and vendor accounts payable reporting—giving their owners visibility into their weekly cash burn and how any swing in sales volume affected that cash flow burn.

Following an overhaul of the accounting processes and reporting structure, a monthly financial reporting package was implemented, with a reporting deadline in the month following the month of activity. The owners were able to review the prior month results before the current month was even over and make immediate adjustments if needed.

Make financial data relevant to your business decisions

Once you’re getting timely reporting, you have to make sure that your reporting is actually telling you something. Getting a weekly sales report that tells you a total and nothing else doesn’t help you. Reviewing a monthly profit & loss statement that has significant swings in expenses and profitability due to your accounting method doesn’t reflect the monthly performance of the business. The data you need to review in your business is specific to you. There are standards, of course, but your financial tools must be built around your business, industry, and model.

If you have multiple locations, you need to track activity by location. Not just sales and cost of goods, but all costs. If a team member is tied to a specific location, their cost should be allocated to that location. Understanding the true performance of each location is important when evaluating your business health overall.

Are you selling multiple services or product lines? Do you have different divisions or different types of customers? Your accounting systems and tools should be structured around your business structure and adapted over time. Financial tools are not one-size-fits-all.

To get Smiley on track, the business was first separated into two divisions—“brick and mortar” and “mobile.”

Margins, operating structure, staffing, and marketing costs are significantly different for these two types of business, so it was important that they be separated for proper analysis.

Next, the business was divided into locations. Because there are multiple “brick and mortar” locations, the company needed to see how each was performing. One location was generating decent revenue—but was secretly draining profit. Only after separating costs and revenue by location did the truth become clear: it had to go.

Smiley also implemented detailed sales tracking, providing revenue and cost by item. They split out different types of product lines into separate revenue line items, and moved production labor costs to cost of goods sold to separate those costs from administrative wages. And, finally, they started tracking inventory appropriately. Purchases were recorded in inventory and only expensed when the product was actually used or sold.

Implementing these changes dramatically improved the integrity of the data that was being reviewed. Not only was the data now accurate, it was relevant to the business. The new reporting structure gave a clear picture of how the business was performing and where there were areas of concern, providing the owners’ direction on decisions that were needed that would have a positive impact on results.

When data reflects the true structure of your business, you can make better decisions.

Use accrual financial reporting to get a clearer picture

Cash tells you what you’ve collected. Accrual tells you how you're actually performing.

A final critical change that was made to the Smiley’s financial structure was to convert them to accrual-basis financial reporting. While the company still reports their income taxes using cash-basis, it was important for business performance analysis that they convert their management reporting to accrual basis. Here’s why.

Accrual-basis financial statements present the true picture of how your business performed in a given period. Cash-basis merely shows how your cash performed. In business, it is true what they say, “Cash is king!” But in financial reporting the real king is accrual.

Looking at Smiley’s historical financial structure, you’ll see why. They were receiving product daily. They did significant volume and used a lot of product. However, they weren’t required to pay for their product for 90 days. This meant that if they sold a product in April, they weren’t actually paying for that product until July. The problem with Cash-basis reporting? The revenue would be reported in April, but the costs wouldn’t show up until July. This problem was exacerbated by the fact that they were growing at such a rapid pace. As their revenue was growing, the costs that were showing up in the same month were related to the purchases from 3 months prior when the volume was significantly lower. This mismatch made the business look wildly profitable—on paper. But in reality, the bank account told a very different story.

Cash basis:

Revenue = cash received | Expenses = cash paid

Accrual basis:

Revenue = earned this month | Expenses = incurred this month

Cash-basis financials presented them with a gross margin of around 60%, while the true gross margin was only around 35%. This is a significant difference and one that had a huge impact on the modeling and forecasts that they were using to decide where to take the business.

Accrual-basis financial statements aim to match revenue with expenses. Accrual accounting recognizes the revenue in the period that it is earned (regardless of whether you’ve been paid or not) and the expenses when incurred (even if you haven’t paid the bill). That is why Accrual-basis financial statements are going to provide you with the most accurate picture of your business’s performance.

The payoff: clarity fuels expansion

Once Smiley had the right financial structure, systems, and metrics in place, they transformed the chaos of rapid growth into confident, data-driven decision-making. They secured funding, cut unnecessary costs, priced for profit, and built a sustainable model to support their team and clients.

In less than three years, they grew revenue by over 700%, opened five new locations, and turned uncertainty into a repeatable system for scale.

Smiley’s story is proof: the numbers behind your business matter. Financial clarity isn’t just about accounting—it’s about unlocking the future you’re building.

So ask yourself: Are your financial systems ready to support the business you’re trying to grow?

They are poised for growth, but more importantly, they have now built a sustainable business that will benefit their clients, team members, and ownership well into the future.