The downturn in the economy continues to have a significant effect on small businesses. Changes need to occur by small business owners in the manner in which they manage their business and literally how they think. Time to re-think the plan.
Donald Todrin, author of “Successfuly Navigating the Downturn”, offers suggestions for succeeding in this downsized economy in his article, “7 Ways to Help Ensure Your Business Succeeds” in Entrepreneur. He has some excellent points and I particularly like number 3) Keep your ego in check and listen to others. Too often small business owners rely on themselves and don’t seek help or advice from others. Remember the phrase, “Can’t see the forest for the trees”? They need to recognize someone else will have a different perspective and that perspective does not include emotion clouding their view. With the owner being emotionally connected to their business, they seldom see a clear picture. Having an adviser offers an invaluable resource in clearly seeing their business and its direction.
Another point Mr. Todrin makes that is extremely good is number 4-Keep track of everything and manage by the numbers. The point is very powerful and consists of three important parts to consider.
The first part of using systems in business and documenting them is essential to running an efficient and profitable business. Not only does this increase your employee productivity but it also provides quality controls. Being competitive in today’s market often comes down to the quality of your service or deliverance of your product. Without systems in place, you can’t deliver quality services or products. Want an edge to your competition? Deliver quality.
The second part of number 4 relates to tracking your business transactions, knowing your numbers and managing your business based on the numbers. It is simply not enough to gather your receipts to enter them into a bookkeeping software package or hand them to your Accountant. You need to review your numbers, understand them and make comparisons. Using that knowledge, you can manage your business effectively. Making your management decisions based on your numbers is removing the emotion from your decisions which we have already determined is crucial.
The third part of number 4 concerns your cash flow and is a critical element of being successful. Cash flow is the life blood of you business. After reviewing and understanding your numbers, business owners need to establish the amount of cash needed to run their business operations. This is similar to a personal budget and having an emergency cash reserve. Using budgets in your business will assist you in properly managing your cash flow needs. Take your budget to the next level and forecast your cash flow for the future. Then analyze it.
- Does the existing business plan provide enough cash flow to replace or add equipment when needed?
- Will there be enough money to implement my new marketing plan next year?
- Can the business afford to add staff?
- When will the business have enough cash to purchase the new software I need to increase efficiency?
- What would happen if I lost my largest client tomorrow?
Being proactive with your business will provide you a healthy and successful business. Take the time to put systems in place, document them and test them. Let trusted advisers guide you. Know your numbers and plan ahead. Then reap the profits!