Archive for the ‘small business’ category

Growing Your Small Business: Consider This…

January 16th, 2015

Coffee Shop OwnerAs a small business owner, you may have plans to grow your company. Before you put your foot on the accelerator, take the time to decide whether (and how much) you should grow your company.

What do you really want?

You believe you have the entrepreneurial drive to build your business into a larger one? Do you want to scale a business? Have more employees to help carry the weight? Have the potential to make more money? Create something that is worth a great deal of money, or that changes the world?

Do you need to grow to appear competitive in your market? To have the budget to get the word out, make more sales, and become an industry leader?

Can you be successful as a “boutique” operation? Sometimes less is more.

Do you want a business that comfortably supports you and also leaves time for you to be with family, pursue other interests or take vacations? You may want to grow but to control the growth so that you can enjoy what some people call a lifestyle business. While this term has been used condescendingly in entrepreneurial circles, there is also an increasing recognition that a solid lifestyle business can indeed be a great business to run.

Potential

What potential does your business have to grow? Some businesses are like finely tuned sports cars. They aren’t working at full capability unless they are on the track, racing forward. They are built to move fast and make things happen. Other businesses are engineered for steady travel instead. How about your company? And are you happy with that Chevy or Lamborghini your company is today? Or do you want to reengineer your business for a different driving experience?

Responsibilities

In a very small business, you do nearly everything yourself. As your business grows, you will delegate some tasks. As you grow even more, or scale the business, your responsibilities are likely to change from doing or a blend of doing-and-managing to higher level managing.

Before putting your dreams of growth into practical steps, consider whether you like doing or managing or some blend of the two, and also whether the satisfaction you get from business is from the rush of entrepreneurial growth or from the day-to-day running of the company you have today.

Money

Depending on how you grow and what type of business you have, you have the potential to make more money as the company gets bigger. Generally, this is one major motivation for growing a company.

It should be recognized that there are times when the larger business is not more lucrative for its owner. As you take on more employees, more infrastructure and more risk, you also have more potential areas for poor performance and resulting reduced financial returns. Which brings us to risk.

Risk

Big leases, big loans, shared equity, a larger staff, and other potential demands of a growing business carry with them higher risk alongside higher prospective reward.

A fast-growing business typically brings some loss of control as well as challenges maintaining quality, assuring profitability, and managing your (potentially also large) competition.

Be aware not only of your best-case scenario but also your worst. Are you ready to deal with risk?

Saleability of company

What will you do with your company when you are ready to retire or move on? Will your children run it? Will key employees buy it or take it over? Will you sell it? Will it end when you stop working?

Size is one consideration in this matter. Many small business advisors recommend that you fund your retirement while you are working, in the event that “you are the company” and that the business “dies with you.”

A business that is not overly dependent on you, and that can continue to make money after you move on, is typically a more saleable enterprise.

Unless you have a novel technology in hand, cash is king when it comes to selling a business, so if making a lot of money from the eventual sale of your company is a key consideration in your planning, you may indeed want to grow the business aggressively.

Small businesses that can run without you can be salable, too, since people frequently prefer to buy an existing business rather than starting their own. However, the proceeds are likely to be lower.

As a business owner, you have a unique opportunity to make conscious decisions about growth, based on the market for your services or products, and on balancing pros and cons of large versus small, considering your own management style, and reviewing how you want to blend business and life goals.

Whatever you decide, you have the privilege and the pride that comes with running a business. So many people would like to do what you are doing every day.

 

 

 

Tips for Starting a Service Business

November 17th, 2014

Service Business 2Many entrepreneurs are people with specific marketable skills and know-how. Taking the step to self-employment by starting your own services business can take the value of those skills to an entirely new level. But starting and building a business requires an all together different set of skills and know-how. So, if you are thinking about being your own boss, here’s some advice to get off on the right foot.

Write down your business plan

Writing a business plan may seem like a pointless and onerous exercise, but don’t skip it. Putting your plan in writing will force you to think clearly about your new business, your opportunities and your challenges. It will help you set realistic goals and keep yourself accountable. A well-written business plan is also critical for securing financing for your service vehicles or other major expenses. One great resource to help you develop your business plan is the U.S. Small Business Administration. Your local chamber of commerce is another excellent place to ask for help.

Seek advice

Starting any business involves risk. You can minimize yours by taking advantage of the experiences of others. A good mentor, or two, can help you avoid the pitfalls, as well as show you best practices that will get your new service business on the right foot. Mentors can also introduce you to other influential people and help you establish your own business network.

Your business mentor can be a coach or consultant you hire, or a more seasoned businessperson who takes you under their wing. One excellent place to look for no-cost or low-cost expert business mentoring is SCORE, a nonprofit organization dedicated to helping small businesses.

If you are looking for advice specific to your type of service business, it pays to go online. Many professionals in your field will happily help you out on industry chat boards or LinkedIn groups. All you need to do is ask.

Track everything

Business is a numbers game, in more ways than one. Most new entrepreneurs know enough to track income and expenses at the very least. But the most successful ones don’t stop there. Tracking and analyzing everything in your business will allow you to make better decisions, avoid wasteful practices and realize greater profits.

One example of tracking used to advantage is your vehicle fleet. Instead of simply tracking expenses, take it a step further and track fuel economy per vehicle or per driver, time on the road and location of every vehicle. Knowing these parameters will allow you to manage your fleet for maximum efficiency and productivity.

Develop systems for your business

Imagine if your entire business ran at 100 percent efficiency. It would be so much easier to make a profit, wouldn’t it? No business is 100 percent efficient, but developing systems will get you as close as possible. Once you’ve figured out what works, write it down, and make sure every employee knows it’s standard procedure. If the procedure you’ve developed involves multiple steps, create a checklist for employees to follow. Even little things like making a habit of placing tools back in their proper spot when a task is finished can save countless hours of wasted time in your business.

Your business will probably have unique aspects that require you to develop some of your own systems. But look out for ready-made tools and systems that can help systematize your business. Accounting software is a good example. So is a GPS tracking system that can help you track and analyze your business fleet.

Don’t undervalue existing customers

As you acquire customers, take good care of them and keep in touch. Develop relationships and earn loyalty. It’s much easier to sell to existing customers than to someone who has never done business with you. Anything you can do in your service business to encourage customer loyalty will keep your repeat business flowing, and it will also bring in the best free advertising possible — word of mouth.

Expect to make mistakes

If you can’t acknowledge, learn from and apologize for your mistakes, then you’re doomed. Part of becoming successful is learning to handle and recover from mistakes. You will make them. If you think you won’t, you’d best keep your day job.

Starting your service business will require a lot of dedication and hard work. But by following business best practices you can avoid many of the pitfalls experienced by new entrepreneurs. Take these tips to heart, and you will improve your chances of developing a rewarding and profitable new enterprise.

 

Leadership Skills for Entrepreneurs

September 25th, 2014

Leadership SkillsAs a small business entrepreneur in a dynamic business world, it is vital to stay informed on the things that impact your company. There is always more to learn about business, and consistent development is a component of success. Savvy business owners recognize that internal improvements are not limited to how the business runs but also to who is running the business. That’s why it is important to create opportunities to develop your skills so that you can improve business performance.

Here are three skills that are common to successful business owners:

Diligence

A large number of entrepreneurs start companies every day. They have great ideas in mind for companies that will make an impact in the market. Many of them take it a step further by getting the concepts out of their head and onto paper, but fall short when it comes to taking the next steps. Running your own business requires extraordinary commitment to get the results desired.

Management

Having your own business means cultivating the skills to be a self-starter. You need to be able to direct yourself to handle multiple tasks in order to manage your business well. You must have the ability to look at your responsibilities and motivate yourself to get going. Improving in this area equips you to work independently without requiring someone else to micro-manage your efforts. As a result, you can see the vision and run with it, looking for ways to put plans in action with the desire to produce good results.

Learn to prioritize by recognizing that you cannot do everything at once. Then arrange your tasks in the order of importance that will have the greatest impact on making progress on your business.

Finally, and probably one of the most important tips for managerial success, is to do what you do best and be willing to delegate or outsource the rest.

Good Judgment

As a business owner you will need to make many decisions concerning your company. So having the ability to make the best decisions from multiple options is very important. You may have had success by referring to your instincts, but when possible, use quantifiable data to back-up your business assumptions, and be sure to consult with industry specific experts when you come to challenges that you are unsure about.

Are diligence, managerial acumen, and sound judgment skills that can be learned, developed, and continually improved upon? If there is strong desire for success, and an understanding and acceptance that it is possible to achieve that success when you have a regimen for starting, running and growing your business one step at a time, then yes, they are.

One method commonly used by successful entrepreneurs, is to keep a reminder of your mission in front of you at all times. This can be in the form of a vision board, a handwritten note on a sheet of paper, or some other tangible item that reminds you to stay focused, and inspires you to take action. Write down your goals and the strategies that you will use to reach them. Convert big goals into bite sized steps so that you can continue to persevere when the task seems overwhelming. Continually develop yourself into a better and more capable business person every day.

2 Concepts for Improving Your Brand

July 19th, 2014

Improving, or repositioning, a brand has a direct impact on the financial performance of a business. Companies that are successful in building their brands enjoy higher customer loyalty and are more likely to attract new customers. An improved brand has a positive impact on profit margins and allows a company to raise its price without becoming less profitable due to a reduction in business. A stronger brand leads to increased market share, revenues and profitability.

Understanding the two concepts of actual value and perceived value, and applying them to your product or service’s brand can help you increase margins for your business and make more money.

Soda sells for 75 cents at the grocery store or $8 at an amusement park. Steaks are priced from $18 at a casual restaurant to around $40 at a fine dining establishment. A cup of coffee can range from one dollar to well over $5. The vast difference in these prices is a result of brand positioning and the value that the brand represents in the marketplace.

If you want to increase prices in your business and make more of a margin on each sale, analyze your brand to see how you can reposition and improve it to be more valuable in the minds of your current and potential customers. Do this by boosting actual value or perceived value.

1. Actual Value

Increasing actual value likely will cost your business more money but will enable you to charge more too if your customers care about the improvements. For example, in the auto business, a sunroof, leather seats and chrome wheels are considered upgrades. It costs manufacturers more to install these, but since car buyers think these features make a car more comfortable, sporty, luxurious, durable or attractive, these add-ons increase the value of the car, and customers will pay more for it.

In your business you are adding actual value when you are paying more on a continuous basis for the cost of materials or labor to improve the customer’s view and desire for your product or service. In the case of the cars, the sunroof, leather and chrome wheels must be added or available every time in order to offer the increased value and capture the added profits that result. Using premium or preferred materials or skill sets rather than just good or good enough materials and labor will allow you to have higher price points if your add-ons are desirable to your customers.

2. Perceived Value

Increases in perceived value are generally more profitable than increases in actual value because you do not necessarily have to spend more money, or any money at all, to achieve increases in perceived value, but you can still charge more for the added value.

Consumers will pay higher prices for attractively packaged products. Making a product package more attractive may not cost more. It can be as simple as using a brighter or darker brand color, a more commanding or refined font or a different shape of bottle. These changes can make a product appear richer or of higher quality, yet the inside product may be the same as a lower priced competitor. It’s all about the perception.

Associations, affiliations and trust also boost perceived value. For example, two identical products may sell for vastly different prices if one is associated with higher professionalism, expertise, style, or just plain fun. For example, if a product is worn, used or favored by celebrities, then it suddenly achieves higher perceived value.

Professional certifications work the same way. A Certified Public Accountant (CPA) may be able to charge a more for bookkeeping and services than an accountant with a degree but no certification. If the CPA is better at the work, it isn’t necessarily due to the certification, but the perception is there for the CPA to leverage.

Protect, build and analyze your brand to figure out ways to boost value for your customers. Whether it is actual or perceived the added buzz and sales can help you reach your annual profit goals faster.

Set Your Prices by Knowing Your Costs

January 20th, 2014

It seems like a simple fact of business; to turn a profit your prices have to be higher than your costs. Is it really as simple as just adding some percentage to your costs to make your company profitable? Actually, it is. The hard part is determining your true costs.

With product-based businesses, setting prices starts with a markup on the product costs. Service businesses can start with a markup of an hourly rate, for the employees and/or owners providing the services to the clients. Those costs should be starting points, but many new business owners use these alone as a basis to set prices. For many new small-business owners, figuring out the complete costs of what they’re selling can be difficult. However, not knowing the true costs can result in underpricing products and services.

The price floor is the absolute minimum at which you can set your prices without sustaining losses on each sale. The price ceiling is the absolute maximum price the market will bear. The price you charge for your products or services will fall somewhere in between.

Here’s what your price needs to cover:

  • The immediate cost of what you’re selling
  • A portion of your selling and general expenses
  • A reasonable profit left over for you

Include every component of your cost-of-goods-sold as you work the numbers for a product-based business. For a service business, use a reasonable hourly rate as your starting point; for yourself (if you’re not counted as an employee) and remember to add on the costs of benefits and employment taxes. Pull the selling and general expenses right off your profit and loss statement; if you have figures from two or three periods to work with, take an average. As for your desired net profits, add on a reasonable percentage for your industry. For example, someone selling original artwork could expect to see a higher profit percentage on each individual sale than could someone selling one-size-fits-all rubber noses.