It is the beginning of a new year and traditionally the time for resolutions, review of goals both past and present and time to set our goals and objectives for the new year. Many of us were busy reviewing the past year with a glass in hand and deciding on the standard resolutions at about five minutes to midnight on December 31. Sadly, many small business owners treat their business goals and strategies with the same considerations and thoughtfulness. Many new clients tell me: "I don't need to do a business plan or strategic planning; I don't need financing and I'm just a small business." Here are 10 questions every small business owner should ask themselves about their business: 1. Do I have a budget for the current year? 2. Do I know how much and where my company spent money last year? 3. Do I know what my cash flow looks like for the next six months, next year? 4. Do I have specific plans for generating new business? 5. Do I know where my business came from last year? 6. Do I know who my customers are and why they buy from me and not my competition? 7. Do my clients regularly refer business to me? 8. Do my employees know what is expected of them? 9. Do I have written procedures and policies? 10. Do I receive regular reports on sales, quality, budget variances, profit, customer satisfaction and employee performance? Even as a sole proprietor, without employees, it is important that you know the answers to the above questions. By being able to answer yes and articulate your responses you position your business to succeed. Budgeting and Cash Flow As a small business you may not think you need a budget. Without some idea of your overhead and expenses you will have no idea how to price your products or services so that you generate a profit, or at least break even. Creating a budget is not complicated. You dont need expensive software programs. Microsoft Excel comes with a budget template; if you dont have a computer you can even use paper and pencil. By creating a budget and reviewing it at least weekly you are able to track your expenses and manage them. Taking it to the next step, reviewing last years budget and looking closely at where you spent your money allows you to make better decisions on this years budget items. It is also important for you to know what your cash flow looks like, remember cash flow and profit are two different animals. You can price your products so that you have a 35% profit, but your accounts receivable may be lagging behind your accounts payable. You need to pay close attention to when your customers pay you. If you know your biggest customer always takes 45 days to pay your invoices, without careful planning you may miss a payroll or pay your vendors late. Business Development Sometimes, we begin to take business for granted. It is easy to become complacent; we are able to pay the bills, even put some money back into the business. We stop looking for new business, because we are comfortable. When this happens, it is just a matter of time before the business is in trouble. You need to have a defined plan for generating new business and you need to work your plan consistently. By evaluating your existing customers and discovering why they buy from you, you can devise a marketing plan to generate additional business. Your existing customers can be your most cost efficient generator for new business. Ask for referrals and provide incentives. By rewarding your existing customers for referring new business to your company you are getting twice the value satisfied existing customers and new customers who have already been sold on your products and services. As a caveat - if most of your business comes from just a few of your customers you should make it a point to broaden your customer base. If one customer provides 50% of your revenue and they go out of business or choose to buy from a competitor your business will be struggling until you can replace that revenue. Policies and Procedures As your business grows you may find the need to hire additional associates. The best way to get the most out of your investment in human capital is to make sure your employees know what is expected of them. By developing clear and detailed policies and procedures and providing them to your employees you create an environment for success. Providing your employees with written policies and procedures makes it easier for them to do their jobs efficiently. Expectations are clear and when there are questions, it is an easy matter to refer to the policy or procedure. Written policies and procedures give clarity and direction to your managers and supervisors on how to handle specific employment issues fairly and consistently. The relatively small investment of time initially will save you much time in the future. Measuring Success You must set specific and measurable standards and goals for your business. You cant measure success if you dont know what it looks like. As you were preparing your budget for the year, you should have set sales goals, established quality standards for your products and services, and performance goals for your employees. At a minimum, you should review your sales, budget variances, accounts payable and receivable, and P&L monthly. By constantly reviewing your results and holding yourself and employees accountable you can and will achieve your business goals. |
