My kids started school today, which is always a mixed emotion day for me: I’m grateful that we all have more structure in our lives again but sorry to see another summer pass with lots of time together and extra time to explore. I’m guessing that my elementary school must have stressed goal setting for our academic years, because the start of school also signifies to me a time to re-evaluate where I am and to establish new goals. Which is exactly what I’m working on for my own business.
Here are some questions that I’m asking myself:
You’ve heard me say it before, but I’ll say it again: start with data. That’s why my first step was to look at my financial statements – year-to-date compared to my budget and to last year. I also evaluate my revenue by product/service offering. It’s important in this step to reserve judgment – we’re only collecting data.
Once I have the data I then start to evaluate it; what’s ahead of budget? What offerings are not as successful as I would like? At this step, I am looking backwards. Again, be careful not to judge too critically!
My next step is to look forward.
If I continue on the current course, what do I expect my year to look like?
How does that compare to my original projection?
At this step, I move from hard data to softer elements. Everything up to this point is factual; this is critical to remember as it is so easy to get tied up in the “should ofs” when reviewing our business’s goals. At this point I ask myself, “How is my energy?” I consider how my work is fitting in with my family and my personal life. Based upon these answers, I consider how I want each element to move forward.
Finally, I set a course for the remainder of this year and begin the process of mapping out the next calendar year, which I will continue to review.
September is a time for new beginnings, and I’m excited as I know my business GPS system has re-set its course and I’m off and running in the right direction. Now I just hope my kids feel that same excitement.
Business owners often feel overwhelmed by their responsibilities. They say it can be lonely at the top, and never is that more apparent than when you’re at the top of a small business! Particularly when it comes to finances, business owners may look around and think “Who can I turn to for advice and help?”
Often, the help you need is much closer than you think. Your accountant, attorney, investors and banker can all be your allies. Use their expertise, experience, and contacts for the success of your business. Understand their roles; they do want your success but they are also beholden to their own bottom line and interests.
Consider the range of people and businesses encountered by professional service providers. My favorite banker had clients in such diverse industries as maple syrup production and computer hardware; ranging in size from $15-$20 million to those 20 times that size. That range of experience was accessible to me. The same held true for our venture capitalists, attorneys, and CPA firm. These professionals can also be a vast resource for contacts and leads.
Bankers, investors, accountants, and attorneys can be the most helpful when you disclose all relevant information to them. Don’t waste their time, or yours, by giving them an incomplete account of any situation in which you need some advice. While you will pay directly for your accountant’s and attorney’s time, extra time from your investors and bankers does not incur a cost. Respect their time; ask for their time to brainstorm with you or walk through a challenge before using it.
Often, I suggest to clients that they create an advisory board, a group of experienced business people with whom they can bounce ideas off or who will share their opinions and experience but who have no voting authority in your business. The good news is they have no vested interest in your business, allowing them to be freer with ideas and less wedded to existing plans. The bad news is that they don’t have a vested interest! At the end of the phone call or meeting, they leave your business and most likely return to their work. You, on the other hand, continue to live in your business. Remember, too, that these individuals are in business as well and have their own business concerns and goals. Use them as a resource and gather input, advice, and opinions. At the end of the day, though, you need to do what is best for your business. These professionals must do the same for theirs.
Consider the business service professionals that you’re currently working with, and ask yourself if they might have unused experience and expertise that you can leverage to improve your business today.
Earlier this week, I threw out the disconcerting fact that over 85% of all businesses fail in their first 5 years. The key to success for new businesses is finding ways to increase revenue while decreasing expenses, and working these into your fundamental business model.
Let’s talk about decreasing expenses.
Consider out-sourcing a function versus performing it in-house. A new breed of administrative support called ‘Virtual Assistants’ can save you a bundle. They are typically highly skilled, resourceful individuals, often times the former Executive Assistant to a President or CEO. They work from their own space with their own equipment and are independent contractors rather than employees.
Create standard processes and templates. As a frequently sought-after employer, my last company received many resumes every week. To be in line with my personal values, it was important that we respond to every resume received, but a custom letter to each would have been prohibitive. We created two standard postcards, one that stated we had no openings at the time that suited their experience and one that stated that we would contact them shortly for an opening. As a result, with very little effort we responded to every incoming resume within two days of our receipt.
Re-negotiate debt provisions and lender fees. Your lender has a vested interest in your business and can be a valuable partner. Every partnership involves give and take; talk to your lender about your terms.
Improve employee retention. Choose your employees wisely and do what you need to do to keep them. They are your company; treat them with the respect they deserve.
Profit is very simple – revenue exceeding expenses. Now that you have actionable tools for both sides of the equation, start today by building a bigger, better, more profitable business!
Brace yourself for a scary fact – 75% of all businesses fail within their first year. Of those that succeed, 50% fail within five years. Out of every 100 businesses that start, only 13 make it to five years. The number one reason is that the company is not set up to be very, very profitable.
The definition of profit that I prefer is very simple: revenue minus expenses. To increase profit, it is simple algebra: you either increase revenue or decrease expenses, without a corresponding decrease or increase in the other, or some combination thereof. Today, let’s talk about increasing revenue.
Again, let’s look at this from a very basic viewpoint. To increase revenue, you either increase quantity or prices. But how do you do that?
Customize your existing product for a niche. For example, if you owned a bed and breakfast, you could create a series of wine-tasting weekends. Because guests will be primarily interested in the wine, this could be scheduled during off-peak season.
Leverage existing business relationships. Don’t be afraid to approach your existing associates to explore mutually beneficial channels of revenue.
Expand demographics. The web can quickly expand your target market from your local market to an international market. Proceed cautiously with marketing on the web; the expense can quickly overwhelm the additional revenue potential.
Select target markets strategically. Choose an initial industry and a function within that industry to target. Once you have successfully entered that market, select a second function within the same industry and a second industry for the initial function.
Generate passive income. Generally thought of as interest and dividends, passive income is also income generated without active participation by you that falls outside of your normal business.
Later this week, I’ll give you some tips and tricks for decreasing expenses.
Helen Dutton, A Vision of Your Own, has provided business and personal coaching for small business owners since 2000, providing online and face to face coaching for entrepreneurs, small business owners, start-up businesses as well as established businesses across the country. Clients come from New Hampshire, her home state, but she has also acted as a mentor to business owners in Atlanta, Chicago, Los Angeles, the Denver area, and closer to home in the Boston area. Helen helps her clients develop their small business ideas, create marketing plans, improve operation efficiency, build customer service systems, build management and leadership skills, and develop confidence as a business owner. Helen provides business tips and resources through her blog and her newsletter, where you can also find business templates to help your business prosper.