Posts Tagged ‘operations’

A Successful Business is a Well-Oiled Machine

January 21st, 2013

 

Since you want more clients or customers, more income, and more time off, you’ll need to make your business run like a well-oiled machine. If you are like most entrepreneurs you’re handling almost everything yourself, and so your business is probably running YOU, instead of you running your business. That means a lot of things are being left undone, opportunities are being lost, and consequently fewer clients and are coming in.

Consistency is crucial and chaos is costly, both financially and time-wise. When things run like a well-oiled machine, when everything’s organized, chaos is reduced. Ideally, you want things run on their own, or by the efforts of someone else, so you can focus on growing your business, while having more time off to enjoy yourself. For this to happen, you’ll need to systemize the processes involved in operating your business.

If you haven’t identified the one best way to perform each repeatable task or process (such as answering the phone in a consistent manner, managing your sales process, etc.) then you’re in big trouble. You need to create some systems and procedures.

Even if you don’t have help from staff, you can still make your business run smoothly.

Begin by documenting everything you do:
Start by tracking your time. Take a note pad and document the time it takes you to do the tasks you do every day. In a week you will have a good picture of where you are spending your time. It also allows you to see what can be removed from your day, and what can be delegated to your team. By keeping an awareness of your time and where you spend it, you will be much more productive. You’ll see a pattern of where you are spending too much or too little time, and which things you are doing that aren’t essential to your business. By keeping track of this, it will help you realize how you can use your time better.

Next, you want to document the process associated with each task:
Write clear instructions on how to complete each task. This will eliminate, or at least improve, chaotic situations. Increased levels of organization will enable a better work ethic and will help keep you on task generating better production throughout the day. It can be eye opening to see what you need to put into place. Once you realize what needs to be done, and fix it, your business will run more smoothly. You may also detect areas of your business that are under, or over staffed. By recognizing this you are attacking an issue before it becomes a bigger problem. You are now also able to better delegate what you need to, so that you can focus on what is the most important use of your own time. Make certain that all task instructions include the locations of all support material so that if you are unavailable your staff can easily find what they need to keep things going smoothly.

The end result should be an instruction manual for your business:
An instruction manual, or operations manual, for your business is a huge asset. It will help you and your staff to keep on track and know where to go to find the information need. It will clearly define the rules and regulations, work ethics and processes clearly. This will help you keep your employees in line, and help employees know their proper role, and what they need to do to fulfill that role. Everyone’s job is easier when the processes and procedures are clearly stated. There won’t be any gray areas when everything is right there in black and white. As you add to your team over time, having your systems documented will allow new people to integrate better, faster and more efficiently with your current team.

Ideally you will want to define your systems and document your processes and procedures before your company grows to full capacity. Then, as you approach full capacity status, you will avoid the breakdowns that cause so many businesses to fail. At the same time, you’ll make more time for marketing and for the ability to service the resulting larger client list.

A prime reason that franchises are so successful is that the operations manual eliminates all the guesswork on how to do things. It tells you “one best way”, and documents everything in a step-by-step manner.

But remember, just because the process is documented, it does not necessarily mean it’s always going to be the “one best way” to perform that task. You should challenge your employees to improve on how things are done to increase productivity and the quality of the results. That said, your operations manual should be a living document.

There are many things in any business that can be systematized. For example, each of your different marketing methods that you use to attract new clients should be well defined and documented, as should your client management, your schedule, your calendar, your email, etc. While you’re at it, your personal life could also benefit from establishing specific procedures. You can systematize your food shopping, your doctor appointments, your personal email, your dry-cleaning, your errands, your banking. You name it, and it can probably be systematized to your benefit.

You’ll be amazed to see how much of a problem-free zone your business becomes. You will have a lot more time to focus on building the business, a lot more room for new clients, and more time to simply enjoy yourself. You’ll have more time for vacations, for self-care, and for spending quality time with friends and family. And that’s what being self-employed is really about.

6 Mistakes to Avoid as You Build a Profitable Business

September 18th, 2012

Where do small business owners go wrong when trying to build a profitable business? Many mistakes can be traced back to such things as not being consistent in preforming some of the most crucial tasks required for a business to function. But there are also mistakes made by not taking a task to completion, trying to take too many tasks to completion, spending time on the wrong tasks, not having procedures in place for the most crucial tasks, and hiring the wrong people for the tasks you expect them to accomplish.

Avoiding these 6 mistakes can save you time, money and a lot of frustration. So as you move your business toward your goals of profit and growth, here are some mistakes you may want to avoid or fix.

1. An Inconsistent Marketing Effort
Marketing may well be the most important task a business must perform. For many, marketing efforts are like a roller coaster ride, up and down based on how busy you are or how sales are doing. If your marketing is sporadic, it’s likely your results will be the same. The key to attracting and retaining customers is consistency. It is better to do 3 or 4 lead generation strategies well and consistently than doing a dozen of them periodically.

2. No Follow Up
Investing resources to generate leads for your company without a proven method to convert them to paying customers is costly. No matter how potential customers come to you, a system for consistent and timely follow up is a key to sales growth. Take the time to develop a procedure for turning prospects into customers. Take advantage of technology, templates and scripts for efficiency and effectiveness. If you are not consistently following up on your marketing, you are not completing the marketing task. Be consistent and watch your sales soar.

3. Doing it all Yourself
Most small business owners became entrepreneurs because they are experts or skilled at something and believed they could do it better than others. But building a successful business requires more than technical know-how. No one is an expert at every task, so supplement yourself with other experts to fill in the gaps. Whether you hire employees, sub-contract work, create joint ventures, work with coaches, consultants or develop strategic alliances, the support you need is available. Don’t try to do it all yourself.

4. Not Identifying Your Customer Profile
The best products or services will go unsold if you are talking to the wrong people, those who will likely never buy. If you invest your time and money promoting your products or services to people who don’t have the resources, authority or need, today or in the near future, you will have spent your time on costly frustration. Who are the ideal customers for YOUR products and services? Do your research, find out who and where they are, how to reach them, and then apply your resources to pull them in.

5. No Procedures
Documented procedures for all your company’s critical tasks and operations is a key to efficiency, consistency, continuous improvement and profitability. Defining the important tasks crucial to a business is often ignored. This mistake becomes obvious when you hire and train new people, only to start losing customers due to poor service or missed deadlines. Don’t expect your employees to have your clarity of vision. They will need to know exactly how to do their work if they are to do that work successfully. Take it one at a time, but make written procedures a priority in your business. The results will surprise you

6. Hiring on the Fly
Are you quick to hire and slow to fire? That phrase describes many small businesses. A strong team of people to support your operations is certainly important, but only if they are the right people. There are proven hiring systems and tools, including a job description and clear goals, to help small businesses attract and retain quality people. Always hire with a purpose, invest in training, commit to developing your team and be willing to let go of those who don’t fit.

Which of these mistakes are impacting your profit and growth? Make it a priority to fix them, one at a time if necessary. The sooner you do, the sooner your sales and profit will grow.

9 Strategies for Thriving in a Tough Economy

March 13th, 2012

Whether or not you believe we’re in a recession, or slowly moving out of one, or even if you have come to believe that what we have now is pretty much as good as it’s going to get, there’s no getting around the fact that we’re experiencing poor economic times. An enduring lack of consumer confidence and decreased sales threaten all businesses, but small businesses are particularly vulnerable as they often don’t have the reserves to help them survive difficult times.

Entrepreneurs who are survivors will look at this as an opportunity to improve their business practices so they can not only weather the tough times, but thrive during them. How, then, can you recession-proof your business? Thinking through the following practices and how you can make them your strategies will help ensure your small business’s success in a tough economy.

1. Protect your cash flow

To keep your small business healthy, cash needs to continue flowing through it. As long as your business exists, you will have expenses. But the harder times get, the harder it can be to keep the cash flowing into your business. Be more diligent in how you are spending money. It’s important to be frugal and aware of your income and expenses. By doing a line item cost for each expense, you will be able to identify areas that need greater attention. Efficient cash flow management is crucial. The sections below are all, for the most part, areas that will have impact on your cash flow, but take special note of the ones regarding evaluating your vendors, reviewing your inventory management, and keeping your personal credit in good shape.

2. Streamline your business practices

This is an opportune time to review your business procedures for effectiveness. Consider areas that can be combined into one. Consider areas that can be structured differently to reduce costs. Think about sharing resources, like administrative or payroll work, with other entrepreneurs to reduce overhead. The goal is to streamline operations so you can still provide a quality product or service, yet realize a greater profit by reducing the expenses to produce it.

3. Evaluate your vendors

If you use vendors for packaging, labeling, distribution, or in other areas of your business, this is a good time to do some price comparisons. There is a lot of competition among vendors to attract new business, so you could realize some serious savings in this area. Since no one wants to lose business during a bad economy, chances are good that your current vendors will meet the competitor’s price. If not, it’s time to move your business to the lowest bidder, just as long as you’re not sacrificing quality.

4. Review your inventory management practices

See what can be done to reduce inventory costs without sacrificing the quality of goods or inconveniencing customers. Are you ordering too many of particular items? Can an item be sourced somewhere else at a better price? Is there a drop-shipping alternative that will work for you, eliminating shipping and warehousing costs?

Just because you’ve always ordered something from a particular supplier or done things in a particular way doesn’t mean you have to keep doing them that way, especially when those other ways may save you money.

5. Focus on your core competencies

A diversification strategy is often recommended for small business success. But too often small business owners simplify the concept of “diversification” to “different”. Just adding other products or services to your offerings is not diversification. It’s potentially just a waste of time and money. Worse, it can damage your core business by taking your time and money away from what you do best. It may even damage your brand and reputation. If you have diversified out into different areas over the years to improve market reach, it might be time to regroup and focus on the core of your business and outsource the rest. Evaluate what is and isn’t working and put more effort into what started you out as a successful entrepreneur in the first place. It’s important to get in touch with your core business and make sure it continues to meet the changing needs of customers. So consider dropping the extras and focus on what you do best and which is most profitable to recession-proof your business.

6. Develop and implement strategies to get your competition’s customers

If your small business is going to prosper in tough times, you need to continue to expand your customer/client base. If you have competitors, then they have customers. So, there are already people out there buying what you sell, just not from you. What will it take to attract those customers? You’ll need to offer something more or something different. Research your competition and see what you can offer to entice their customers into becoming your customers. It’s not only lower prices or a better price/quality trade-off that gets the business. Providing better customer service is often identified as one of the easiest ways to outdistance the competition. But you need to do the research in your own market to find out what it takes to be the customer’s first choice.

7. Make the most of the customers/clients you have

They say that a bird in the hand is worth two in the bush. The bird in the hand is the customer or client you already have. These customers are an opportunity to make more sales without incurring the costs of finding a new customer.

Even better, he or she might be a loyal customer, giving you many more sales opportunities. If you want to recession-proof your business, you can’t afford to ignore the potential profits to be had from established customers. But remember that your customers are going through tough times too. In order to retain their business, implement measures to express your appreciation. This could be a one-time price reduction, a customer loyalty card, or a referral incentive. Whatever the strategy may be, it should be something of value to the customer and within your marketing budget.

8. Continue to market your business

In lean times, many small businesses make the mistake of cutting their marketing budget to the bone or even eliminating it entirely. But lean times are exactly the times your small business most needs marketing. Consumers are restless and looking to make changes in their buying decisions. You need to help them find your products and services and choose them rather than others by getting your name out there. So don’t stop marketing. In fact, if possible, step up your marketing efforts.

9. Keep your personal credit in good shape

Hard times make it harder to borrow and small business loans are often among the first to disappear. With good personal credit, you’ll stand a much better chance of being able to borrow the money needed to keep your business afloat if you need to. To recession-proof your business, keep tabs on your personal credit rating as well as your business one and do what’s necessary to keep your credit ratings in good shape.

There’s absolutely nothing that will make your small business one hundred percent recession-proof. But implementing the practices above will help ensure your small business survives tough times and might even be able to profit from them.

Business Start-up Costs

September 12th, 2011

Understanding what it will cost to start up a new business is a major factor toward the success of every business.  Each business start-up will have unique needs. A retailer might need a storefront and staff to operate it, plus inventory, while a manufacturer might need machine shop equipment and trained staff to operate it, plus raw materials and a warehouse. If you’re starting an online business, you might be doing it at home, may not need an outside facility and will have minimal operating expenses and possibly no staff at all.

It’s best to determine the financing and borrowing needs of a new business by estimating its start-up costs when writing the business plan. Business plan writing software, the US Small Business Administration and other organizations offer start-up cost worksheets to help identify these business expenses. Or with a basic knowledge of spreadsheet software such as Excel and the following set of example cost categories, you can put a custom worksheet together yourself. 

Costs for a start-up business can be divided into these sometimes overlapping categories:

Permits and Licenses
A start-up cost estimate must include funding to cover not only the business license and Fictitious Business Name registration and publication, but also the cost of permits, zoning and possibly a zoning variance. You may also have expenses related to refitting your place of business to satisfy licensing and regulatory requirements. For example, your business may have to conform to fire safety regulations and may incur the cost of fire extinguishers, sprinklers and exit signs.

Professional Fees
Setting up a legal structure for your business (e.g. LLC, corporation, etc.), trademarks, copyrights, patents, drafting partnership and non-disclosure agreements, etc., will require attorney fees. You may also need to engage the services of an architect or engineer, and retain an accountant and/or a tax advisor. Consider that some of these professional service expenses may be ongoing.

Administrative Costs
Administrative costs include anything else you need to have on a daily basis to operate a business including express shipping and postage, and a wide range of office supplies, and other consumables.

Insurance
There is no better protection from the unforeseen than to have the full and proper insurance coverage in place. You will need liability and property insurance to protect yourself and any business assets. Some businesses also require workers’ compensation, health, life, fire, product liability and professional malpractice insurance. Check what you need for the kind of your business.

Depending on your type of business this could be a considerable expense, or maybe not.  If you are starting a typical home-based service business your renter’s or homeowner’s insurance may cover your business equipment, supplies and inventory. But it’s best to be cautious and check your policy coverage with your insurance agent before you open for business. Often a small additional fee, perhaps $50 or so, will purchase a rider for your policy that will cover such equipment as your computer, telephone and printer/copier.

Premises & Business Location
Some costs for a business location are considered one-time business plan start-up costs such as building renovations, down payments on a mortgage, construction costs and landscaping.

Other costs of having premises are monthly expenditures such as the payment of a mortgage or rent, utilities, parking, building and landscape maintenance, and office security. Also consider that you will need to buy office furniture including desks, chairs, filing cabinets, etc.

Technology Expenses
A cost effective and efficient company will leverage technology and must estimate expenses related to computer hardware and software, printers, copiers, telephones (both land lines and cell phones), PDAs, website development, optimization and maintenance, internet access, security measures, and IT consulting and training.

One-time expenditures often include the purchase and installation of computers and telecommunication equipment including networks, phones, and mobile communications gear. Monthly expenses can include equipment leasing or payments and technical support services.

Marketing, Advertising and Sales Expenses
Marketing and promotion are vital to the success of any business. All businesses should have advertising budgets based upon their business models. A marketing plan will help determine the exact costs required for a specific business model.

Advertising should be considered a monthly expense that can include the cost of Internet and print media advertising, postage for mailings, design and printing costs for promotional brochures and stationary, public relations services, event or trade show attendance or sponsorship, trade association or chamber of commerce membership fees, plus related travel and entertainment.

Employee Expenses
Many business start-ups fail to include an estimate of the owner’s salary in their business plan start-up cost estimate. Omitting this important salary can cause undue stress during the first year, when the business may not be making a profit. Business owners should include a twelve month estimate of all employee costs, including salaries, payroll withholding taxes, worker’s compensation insurance, and benefits. Including your own.

Business Product
Businesses that sell a product must consider start-up costs for such items as initial inventory, vendor deposits, raw materials, manufacturing equipment, warehousing costs, product packaging, shipping, shipping insurance, and sales tax.

Businesses that provide a service must consider costs such as travel to client sites, mobile services and printing costs. Business product costs differ based upon the business product and business sales model. Writing a business plan will help to identify the start-up costs.

Operational Expenses
Operational costs should be budgeted out monthly. Estimate costs such as telephone, mobile services, Internet access, electricity and other vital services for a year, since the loss of any of them will directly affect the success of the business. Other operational costs include on-going , attorney and other professional fees, banking fees, credit card usage fees, and possibly transportation expenses.

Factor in the Time to Get Off the Ground
One critical component of getting an accurate start-up cost estimate is to determine the length of time it’s going to take you to open your new business. It will be very different if you’re opening a restaurant versus an eBay business. No matter what your business type, take into account everything you will spend, from the moment you begin the start-up process, through the moment you make your first sale. If you need three months from the time you sign a lease to the time you can put the open-for-business sign on your retail storefront, then calculate how much money you will need for salaries, electricity, rent and so forth, during those three months.

Learn the Specific Costs for Your Type of Business
There’s a wealth of resources available to you on the Internet that you can access to understand the specific costs associated with your particular business. For starters, engage multiple social media platforms, connect with other people in your industry, and post on message boards asking for help from fellow entrepreneurs.

Check out your industry’s trade association(s). There should be active members who are going through or have successfully navigated the start-up process, and they may be happy to share tips with you. You might even get access to sample business plans and checklists for your market niche, but most importantly, you’ll find out which hidden costs to be wary of in your industry.

Take every opportunity you can to network with business owners in your industry, both online and in person. They will have the best understanding of how the costs of a typical business in your industry balance out across the above categories. With that knowledge, you’ll be able to create a reasonable cost estimate for starting a business of your own.

Above all, be realistic when calculating your start-up costs. The first attempt to list out and calculate your costs may not be complete. Continue to research, consider your options, and refine your analysis until you’re satisfied with the final number, and then take the additional step of adding a miscellaneous line item for 10% of your total budget. The fact is, you’ll spend more than you expect to get your start-up business going, and the miscellaneous category will be there to cover the inevitable unexpected costs.

8 Ways to Reduce the Cost of Your Small Business

July 29th, 2011

 

Cutting costs can be a great way to increase profitability, or to afford the assets essential for growing your business. The problem is, when you’re running a small business things are usually happening so quickly that you can’t take the time to analyze your spending and determine if you are really acting as wisely as you think. However, it’s more likely that a small business will experience a noticeable increase in profit due to a series of small cost-cutting strategies rather than by the acquisition of a new client.

Cost cutting strategies don’t have to be complicated; they just require that you pay attention to some of the more mundane aspects of your business.

1. Make a Budget and Stick to It
Budgeting is an inseparable component of reducing business expenses. When you don’t know exactly where the money is coming from and going to each month, you cannot make smart and effective financial decisions. A proper budget for your business is a powerful tool to reduce business costs.

2. Make Better Use of Technology
Technology can turn out to be a real money saver and can advance your business in many ways. Technologies like teleconferencing services, online payment services, open-source software and remote desktop applications make a great contribution in reducing small business costs.

For example, consider remote applications such as using the fully compatible Google Docs instead of Microsoft Office. It’s a small move that will dramatically improve efficiency. You can access Docs from anywhere and from any device. Sharing documents is much easier, so collaboration becomes even more efficient. Depending on how many employees you have, this can cut thousands of dollars or more out of your annual software expenses.

3. Shipping & Delivery Services
Shop for the best deal on your shipping and delivery services. As the amount of items you dispatch increases, ask for rate reductions from your shipping company. If they won’t reduce your rates, offer your business to other shipping companies. Shipping is very competitive and there are always rate saving deals to be made.

4. Product Stock and Business Supplies
Continually research the prices you pay for the product stock you sell to customers and the supplies you need to operate your business. Don’t compromise on quality, but keep an eye out for similar, or the same, products at lower cost. As the amount of business you do increases, ask your suppliers for discounts. Plus, ask your regular suppliers for other similar products that could satisfy your customer demand but at a lower cost. You may just stumble upon a new fast moving product line.

Whenever possible buy in bulk, not only for your product stock, but also for the items that your business uses on a continuous basis. A good way to do this is to observe which office supplies you always seem to be running out of. Shop around for the most attractive price. When you buy large amounts at once, you will usually get much larger discounts.

5. Embrace the Paperless Office
Businesses often overlook the expense incurred by having hard-copy documents. If you could reduce, even by half, the amount of paper, ink, mailing supplies, postage, etc., that your business consumes, it would surely be a noticeable amount. You don’t have to go completely paperless, and probably can’t as there are always some records and other documents that must exist in the physical world. But most need not. Surely you are already sending all your invoices by email, and the ones you receive probably don’t need to be printed out. Almost all important paperwork can be kept in digital format and stored on a computer rather than in a filing cabinet 

6. Promote Your Business Online
You are probably already marketing your business online, as that has become a crucial component in attracting customers. You’ve been building your brand and establishing your presence on the Internet ever since you set up your company website, but you need to keep going in that direction. Your money is better spent on starting a business blog, leveraging your social media properties and advertising with the appropriate online sites and tools, as opposed to the old print media methods. This will invite quick responses from new and established customers at a lower cost and a higher volume per dollar spent.

7. Premises
Your premises may be one of your most expensive overhead items. If you are just starting out, don’t lease a place of business until it’s absolutely necessary. If you can work from home, continue to do so for as long as possible. You already pay the various utilities at home, so running your business there will only increase these bills by a small percentage. Don’t add rent or mortgage payments to your expenses until it makes proper business sense. Even then, try to find a facility that minimizes your cost exposure by perhaps renting some of the space to another business or looking for a location where you may pick up some passing retail trade.

Business places are often expensive but, in many cases, you can reduce these costs to a great extent. By looking for a co-working arrangement, a sub-lease, a temporary office or temporary storage site for product inventory, or by setting-up a home office, you can reduce the cost of your premises.

8. Get an Accountant
Save money in every way possible but keep in mind that a good accountant will save you the money you pay many times over. Good businesses fail on the back of poor advice. Good businesspeople are cleaned out and demoralized by the unforgiving tax man, also due to the lack of good advice.

Even if you don’t have your accountant doing all your bookkeeping and compliance work, you should still have up-to-date information at all times. So when establishing a business use software from the start, and if you can get into the practice of recording every transaction more or less as it happens, you won’t wind up with a backlog of work to complete. The information your system provides can be used by your accountant to give you the analysis and reporting you need to make good business decisions, and should in-turn reduce your annual expense.

The Bottom Line
It’s impossible to run a business without some overhead. But these costs can be minimized or eliminated in many cases, leaving you with more profit in your pocket. The cost savings process may seem obvious, but even the best organized among us forget, or put off, our cost saving procedures. However, continually analyzing and reducing costs will not only dramatically increase the chances of your business succeeding but, if implemented on an already successful business, they will seriously increase profits.