Posts Tagged ‘operations’

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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.

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Posted in action plans, best practices, business goals, entrepreneur, management, small business, strategic planning

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8 Reasons Small Businesses Can’t Make a Profit

November 11th, 2013

8 Reasons Small Businesses Can’t Make a ProfitI know from running an accounting and bookkeeping practice that many small business owners are making the same mistakes, and those mistakes prevent them from accomplishing the goal of being profitable. After all, a business isn’t there just to make money, it should be profitable.

This list of eight common mistakes that reduce or eliminate profitability is one all small business owners should check themselves against:

1.  Underestimating all the costs involved in producing, packaging and shipping a product
2.  Overestimating the size of the market for a product or service
3.  Undercharging for their services
4.  Not classifying expenses properly to take advantage of tax codes
5.  Purchasing too much, not enough or the wrong kind of insurance
6.  Overpaying on bank fees and credit card fees
7.  No collection process in place for customers that have not paid
8.  Not having accurate, up-to-date reports to provide the above information so corrections can be made

Many business owners try to keep their own records, (or have a spouse or friend help) and because they lack the knowledge and/or time to do it properly, they don’t have the information needed to evaluate and correct potential problems.

Sometimes there is enough money coming into the business to continue despite making many of these errors but correcting them could mean a much better payback for the owner. More often what happens is that the owner gets frustrated and overwhelmed. In such an environment of confusion time is not leveraged properly, decisions can be made in desperation, and more and greater mistakes are made, further distancing the company from its profit objective.

Once a proper bookkeeping system is set up and brought current, the owner can see the whole picture and assess where changes need to be made. Sometimes minor changes like switching to a different bank or credit card company, increasing prices, or outsourcing a specific task can have a big impact on profitability. Other times something more involved is necessary such as implementing a system of pricing levels, changing advertising tactics, or even changing the direction of the company to be able to offer a more competitive and profitable product line.

Having accurate bookkeeping, and its associated reports, provides the business owner with the necessary information to get a clear picture of the economics of the company. Evaluating business operations and making the day-to-day decisions becomes a process based on the facts of the business not the “feel”. Even if your company makes pants, you shouldn’t be running it by the “seat of your pants”.

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Posted in , Accounts Receivable, action plans, banking, best practices, bookkeeping, business goals, cash flow, entrepreneur, management, profit, small business, tax, Uncategorized

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Is Your Budget Incomplete?

October 8th, 2013

Is your budget incomplete?Estimating and matching expenses to revenue (real or anticipated) is important because it helps business owners to determine whether they have enough money to fund operations, expand the business and generate income for themselves. Without a budget or a plan, a business runs the risk of spending more money than it is taking in or, conversely, not spending enough money to grow the business and compete.

So you assemble a budget spreadsheet that starts with your projected profit, then accounts for the operating expenses required to generate that profit, and calculates the gross profit margin, and then estimates the required sales revenues. You look over the results and decide that the profit goal is doable because the sales revenues are realistic and the required expenses are complete. But are they? Have you considered all of the following?

Purchase Price vs Landed Price
Does your budget account for the difference between the purchase price for a product and the landed price? The landed price is what really matters, because it includes the costs of freight, duties, taxes, storage, etc. Knowing the true cost of getting the product into your hands is crucial when setting the price and insuring profitability. Clearly it is advantageous to reduce the cost of each or any component of landed cost. Each one will allow the seller to lower the final selling price or increase the profit margin associated with that sale.

Slow Growth
Many entrepreneurs don’t account for how much money they will spend if their idea does not take off as fast as they hope. When budgeting, make sure to create at least one “very worst case” scenario that does not have much or any growth, just so you know what will happen if it all goes wrong.

The Effects of Scale
Scaling may affect more areas of your business than you can anticipate. Ongoing processes such as training new employees and maintaining quality control are just some areas that might get exponentially more difficult, without even factoring in the effect of any new operations. Be sure to budget in the money and time to make systems and procedures more efficient, as new problems related to scale will inevitably arise.

Insurance, Equipment and Software Applications
Three of the biggest expenses that may surprise you as an entrepreneur are:

Insurance: You need to budget in much more than you pay as an employee for health, disability and business insurance.

Equipment: Will you need additional equipment and office furniture to provide the production capacity that your profit projection required? Even simple items like tools, racks, chairs and file cabinets can add up to substantial costs.

Software: You’ll need to purchase licenses for each user.

The Cost of Networking
Entrepreneurs sometimes forget how expensive it can be to do networking in the right places. Conferences, for example are great for networking. However, ticket costs, hotels and transportation to conferences add up. Even if most of your networking is at free or low cost events, consider how much money is spent taking people out to lunch and coffee to network with them one-on-one afterwards.

The Costs at Home
When you’re caught up in the fast pace of running and growing your business, it’s easy to forget that there needs to be at least enough money to put food on the table at home. Even if you cut your personal expenses down to bare bones, they do still exist. Make sure they make it into your budget, rather than stressing about them down the line.

Paying Taxes
It’s easy if you’re self-employed, especially if it’s in a start-up, to forget to put enough money aside for taxes. Budget 15-20% of gross revenue or 35% of net revenue (until you know your business better) for paying the taxman. It would be advisable to put the money aside in a separate bank account every month so you’ll always be able to make your tax payments in full and on time.

Unpredictable Costs
There will always be costs you couldn’t have predicted, and because of this it’s important to have a buffer-fund of as much money as you can spare to handle those server crashes, extra hires or other incidental costs you couldn’t have known to figure into the official budget. Consider that an extra 10% of your budget should be included in a Miscellaneous Expenses line item on your budget spreadsheet.

Review the Business Periodically
While many companies draft a budget yearly, small business owners should do so more often. In fact, many small business owners find themselves planning just a month or two ahead because business can be quite volatile and unexpected expenses can throw off revenue assumptions.

Bottom Line
Budgeting is an easy but essential process that business owners use to forecast (and then match) current and future revenue to expenses. The goal is to make sure that enough money is available to keep the business up and running, to grow the business, to compete, and to ensure a solid emergency fund.

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Posted in , action plans, best practices, budget, business goals, cost, entrepreneur, profit, small business, start-up, strategic planning

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5 Ways to Become Profitable

August 23rd, 2013

5 Ways to Become Profitable

All businesses want to make money. And of course if they don’t, then even those with great products or services will fail. Making more money and becoming a profitable business is what it’s all about. Here are five strategies that can help.

1. Change the Way you Operate
Analyze your existing business models and try to establish ongoing revenue streams. If your customers are buying infrequently then you might, for example, sell an ongoing re-supply program or a maintenance plan instead of just a one-time or stand-alone sale. Establish a relationship with new customers and change the relationships with established customers to tie the profitability of their business to your products or services.

Look around, analyze and learn from what your competitors are doing. Think about what you can innovatively apply from those lessons to your business.

2. Become Visible and Connected
If you have a long established company with a great reputation, loyal customers and respected industry experience, then you are probably running a successful business. But along comes the new guy who puts his business on the Internet and posts his credentials all over the place. Everyone, including your customers, can find him. You can’t sit there and assume that just because people know who you are you will remain dominant.

You have to have a marketing plan that addresses the current methods used by potential customers to find the products or services that you offer. When they search the Internet, and you’re not there, or they can’t find you, then in 100% of those cases you will not get their business. A lot of older small businesses don’t have a web-presence. If that’s you, or you don’t have a strategic marketing plan in effect, then you need to take your reputation online through social media, a website and a blog to connect with customers, including the ones you already have, or you won’t have them much longer.

3. Raise the Bar on Marketing
A lot of small businesses think about sales but not marketing. You can’t just go out and try to make sales; you have to have a plan with a strategy coherent to your industry, your company and the prospects you want to target.

In order to track the leads your marketing program generates, you will need customer relationship management (CRM) software, although a well-designed Excel application may be OK as you get started.

Consider using search engine ads, email marketing and other such online advertising.

Give your business an immediate web presence through social media networks including LinkedIn, Facebook, Twitter and YouTube.

Offer tutorials, demos, or new certification sessions as webcasts or podcasts for immediate download.

All these types of promotional vehicles need to be on the table because that’s what your competitors are doing.

4. Make Every Person a Salesperson
Some employees don’t think they’re there to promote sales or the business and are just there to collect a paycheck. But those days are gone and those people are the first to be laid off. Everyone should be an income-producing part of the business no matter what their main function might be. Everyone needs to pitch in to help cut costs, sell, and network on the web. Motivate employees to spread the message and reward those who make the extra effort or are producing new business.

5. Streamline Your Costs
If a business is having profit problems, the options are pretty straight forward. You can increase sales, decrease expenses, or do both. Due to the sluggishness of the current economic recovery, sales may not be where you would like them to be, and increasing sales may be a slow road. Decreasing expenses may be a faster way to turn things around. Try fitting expenses into three categories: fixed costs, such as rent and other overhead, sales-related costs that are tied to producing revenue, and discretionary expenses, such as new equipment and bonuses. Examine every single line item looking for ways to save, even with the fixed costs. Telephone and insurance costs may be fixed, but they are also competitive, and therefore negotiable.

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Posted in , action plans, best practices, bookkeeping, business goals, cost, customer service, entrepreneur, management, profit, small business, strategic planning, Uncategorized

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6 Myths About Starting a Business

July 17th, 2013

Lots of people decide to take the entrepreneurial path and start their own business. The idea of being your own boss, making it big, and having a company that you can point to as your life’s work is very appealing. But the realities of starting up a small business are sometimes overshadowed by myths which make it difficult to deal with the real challenges that arise in those first few years, resulting in unreasonable expectations, frustrated entrepreneurs and potentially a failed business.

Here are some small business startup myths that might keep you from realizing your vision:

1. You should spend a lot of time preparing a detailed business plan
A client of mine in Gardena believed, as many business owners believe, that they should spend a lot of time preparing a detailed business plan, and that the business plan needs to include lots of what-ifs and elaborate financial projections. A grain of truth obscures a much larger point here. Yes, it’s smart to have an overall strategy in mind before diving into a business of any kind.  However, it’s very possible that by the time you finish your do-all-end-all business plan, the market will have changed so much that it will be about time to start on a new one. Business plans are especially important in the initial phases, as it is essential your businesses road map includes your goals. It is also important that you refer back to your plan every few months, check these goals, and add or change them accordingly.

The problem is that detailed plans work best when you are pursuing a fixed goal, such as losing weight or sticking to a budget. In these cases, a planned sequence of steps will best accomplish the goal. In business however, the goal is meeting consumer demand, which is often a moving target. Look at all the businesses (like Google) that are now doing something radically different from their original plan. So create your business plan, and then get busy developing a product and trying to sell it. Then resolve to be open-minded and react to opportunities as you see them emerge.

2. You have to develop the coolest, most innovative product
Many entrepreneurs think they have to develop the coolest, most innovative product. Entrepreneurs are often creative-types, dreamers and inventors, and they get so caught up in the coolness of their product that they forget that they need see if anyone will actually pay money for it.

What you do need to do is get your product to market as soon as possible, to start generating revenue and gain customer feedback. All companies, large or small, need to be more customer-oriented than engineer-oriented. You have to take into account customer demand, and develop products based on that feedback. Too many entrepreneurs so endlessly improve their products before starting to sell them that by the time they finally do, they’ve run out of capital and have to shut down.

Get a workable product out the door and fix the bugs as you go along. That way you also get valuable feedback about its strengths and weaknesses, for the market doesn’t necessarily agree with you about what’s perfect.

3. You’ll have more time to do what you want
Yes, you do own your time. By, ironically, you will find yourself using more and more of this time to run your business. Whether this hoped-for scenario actually pans out, is largely a function the business you are in and how much time you devote to it up front. Early on, you will almost definitely not have more time on your hands.

As a client of mine in Manhattan Beach found, there are many benefits (personal and financial) to having your own business, but plenty of free time is not one of them. You will probably have a little more flexibility, as many small business owners choose to work late at night so that they can spend time during the day with their families; but there are still some major sacrifices, such as sleep. Starting up a small business requires that you work until the work is done, without exception. Those fantasies of taking long vacations while your business grows itself are just that, fantasies.

None of this is to say that you will not ultimately have more freedom as a result of running your business. However, to expect a lot of it in the early days would be an exercise in self-delusion. So prepare yourself for immense demands on your time.

4. You’ll be able to write everything off
Absolutely not, unless of course, you have a desire to get audited. I can’t tell you how many clients have come to me over the years for help getting their books in order only to have to be told that even with a complete set of transactions and reconciliations, their books won’t be clean until we remove all the personal expenses they’ve burdened their profit picture with. Personal expenses should not be expensed to your company, and the business expenses you do incur should be clearly connected to the business you’re running. While it’s true that business owners can write off more than employees can, there is great risk in taking this too far.

Typical real expenses can include your computer and business operating and account management software, rent, employee salaries, money paid to independent contractors, advertising costs, and your business phone bills. You probably will not get away with deducting 100% of your car payments, nor gas and repairs. You can write off the portion of auto expenses that you can document as being essential to your operations. The key word here is “document”. Keeping good records is critical. Basically, if you cannot document it and cite a clear connection between the write-off and the operation of your business, your attempt at a write-off could trigger audits, fines or worse.

5. If you build it, they will come
Despite the Field of Dreams reference, setting up shop and getting your startup ready for business, doesn’t mean that the world will beat a path to your door. A former client in Torrance found out the hard way that today’s consumers have an endless array of choices, meaning simply “building it” will not cause customers to walk through your doors and snap up your products. No matter what type of small business you choose to start, it will rarely, if ever, be sufficient to open up shop and idly wait for business to start pouring in.

You still need to market and advertise your business strategically. That means having a plan and a budget.  It also means researching the most effective methods for marketing and advertising. There is no shortage of ways to waste money in advertising, as a client in Lawndale discovered, and it can end up being a huge financial drain on a fledgling company. No matter how good you are, there is lots of competition and your small business has to establish a presence and reputation to go along with your talent.

Consider your number one priority after opening your doors to be spreading the word about your product to your target market as much as possible.

6. Starting a Small Business is Rewarding
One other common myth about starting a small business is that it can be an incredibly rewarding experience. But unlike the myths presented above, this one has great potential to become true.

The independence and the satisfaction of turning a business idea into a successful enterprise are probably what most small business owners find the most rewarding. And there are all kinds of other satisfactions, including creating a successful new product or service as a result of solving unforeseen problems, or from customer feedback. So don’t let the myths of starting a small business put you off; the reality is so much better.

Small business is one of the most exciting arenas for earning a living.  There is plenty of creative potential, and a chance to really make something tangible for yourself and your family. But doing so requires more than just the vision and determination of a bold risk-taker. You need to be intelligent about how your business is framed in the marketplace, and what obstacles there are to overcome. You also need to be aware of the tools and support that you have at your disposal. Staying focused on these realities, and avoiding the myths that many fall prey to will only increase the chances of success and longevity in your small business.

 

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Posted in , action plans, best practices, bookkeeping, business goals, entrepreneur, management, marketing, profit, small business, start-up, strategic planning

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