Archive for the ‘Business Growth’ Category
Yourself As Client
This is part of a series of posts on what you can do to be more successful in your business this year. To get a free report full of success tips for your business, click here.
As 
a small business owner, it is very easy to shortchange your own business in favor of helping your clients. What I want to ask you is, “what if you were your next client?”
Taking time out to focus on your business is necessary. If you don’t get a handle on the details of your small business, things could easily spiral out of control. So do yourself a favor. Schedule in some time to focus on your business.
Do Your List
There are many things that you can do to improve things. This might include finally putting some procedures on paper. You probably have a whole list of things that you have been putting off. Get them done.
The Things You Can’t Do
There is another element to this, however. Say you run an HVAC company. If so, I bet your furnace is in tip-top shape for the winter. But how about your books? Your marketing? Not surprisingly, we tend to focus on our area of skill. This is actually a good thing. Too often, though, we don’t bring in other skills to help make our businesses better.
If you are a caterer, you probably don’t spend much time giving clients advice on their web site. If they need help, what would you do? I bet you would refer them to someone you know who does web sites. When you look at your own business as a client, maybe you’ll realize that it is time to refer in some other businesses and professionals to help.
Bring in the Professionals
You wouldn’t try to do things yourself that are out of your area of expertise for your valued clients. But for some reason, you have a tendency to suffer through your weak areas for your own business. Stop. Get some help. Bring in the professionals.
If you want to be the best business possible, you need the best help possible. This includes great help in accounting, legal, marketing, even systems development. Unless one of those is your own area of expertise, you need to be hiring out for those. Is it going to cost money? Sure it is. But it will also help you create a more solid business that will be much better at generating profit and cash flow. In other words, it is money well-invested.
If you were your client, you would treat yourself better. You would give yourself the same advice I am giving you. You would bring in the experts when you didn’t know how to fulfill a need. And in the end, you would have a tighter, more efficient, and more profitable business.
–
Bradford Shimp builds web sites for small businesses at BroadRiverCreative.com. Follow Bradford on Twitter @bradfordshimp.
The Problem With Debt
No one likes to have debt hanging over them. In business, if you don’t handle it right, it can become a dangerous distraction. The fact that you owe money makes the risks of business that much more real. Running a debt-free business is a dream for many small business owners. Getting to that point, however, is often difficult. And not being willing to take on any debt, ever, may limit your growth potential.
Debt is Normal
I am not advocating taking on debt for your business. I am just pointing out that it is normal. The nature of business compels many owners to take on some sort of debt. The problem with debt is not usually debt itself. The real problems occur in why you incur debt and how you react to having debt.
Incurring Debt
A healthy business takes on debt to grow. Whether for a big capital purchase, a building upgrade, improved infrastructure, the debt is taken on to pay for a one-time cost. In this case, you are always better off if you already have enough monthly cash flow to cover the debt payments. Taking on debt in hopes that it will help you grow enough to pay the monthly cost is not your best move.
An unhealthy business takes on debt to meet payroll, to pay a vendor bill, to purchase small office items. If you can’t pay your day to day bills, you have a problem in your business that taking on debt will not fix.
There is a gray area here, at least in my estimation. Some businesses are very seasonal and take on debt to get them through the off season. I would say this is a short term plan. Eventually, to be successful, you need to be able to store up enough cash reserves to make it through the off season. An even better business move is to add new products or services that will help you keep the money coming in all year long. If you prefer to take several months off, that’s your choice. You may feel confident in taking on debt to make it through, because you always pay it off. Once or twice on this is fine. But its not a healthy habit to get into. What if you have a bad year? Now you can’t pay off your debt and have to take on more. Far better to walk into that situation debt free. So reverse your habits and start squirreling a way some money to make it through. It may take several years to store enough, but once you do, you should be able to break the debt cycle.
Before you incur more debt, consider what it is for. If it is for regular business costs, you need to reorganize or fix your business. Get your cash flow and profit right before you worry about anything else. Again, this will take time. Just be sure to start walking down the path right away.
Dealing with Debt
Once you have debt, it doesn’t really matter how you got it. You still need to pay it off. Hopefully, you have a budget and a plan. If not, get one in place.
I personally think it is a mistake to throw every extra cent you get toward paying down your debt. It is an especially bad idea if you do not have a budget and if your costs of doing business tend to fluctuate. The first thing you need to worry about in your business is cash flow. Don’t drain your cash flow by tying it all up in paying down your debt. Have a planned amount that you pay each month and stick to that.
If you are on a plan for your debt, you can the focus on building your business and increasing things like profit and cash flow. Never make your business about your debt. Never think, “I need to get more sales so I can pay off this debt.” You didn’t get into business to pay off debt. You got into business to make a profit. So focus on that. Continue to pay yourself and everyone else. Chip away at the debt that you do have. At the same time, plan for future expenses and future dips in business. You should be building a cash cushion.
It would be a mistake not to build a cushion of cash because you are focusing on debt. That cash can help you avoid further debt, which is going to do far more to help your business in the future than paying off your current debt early. Lets say you have $50,000 in business debt. At the same time, you have a goal to build a $20,000 cash cushion. Once you build that kind of cash up, it is going to be very tempting to take it and throw it on the debt. The problem is if you do that you will still have $30,000 in debt and no cash cushion. Now something bad happens, and you need money. You are left with no choice but to take on more debt. Instead, you should keep the cash on hand and continue to pay of the debt as you planned, one month at a time.
I am not saying it is never a good idea to pay your debt off early. If you are in a position to do so, then take advantage of that. But if it is a choice between investing that money for growth or paying off a chunk of debt, I would always invest for growth.
Take the long term approach to your business. You want to be healthy for a long time. Get your business in such a shape that it doesn’t need to take on debt for regular costs and so it can handle new debt payments for wise capital expenditures. In the meantime, take a monthly approach to your old debt. As you get more cash flow and profit, you can always increase those monthly amounts. But do so only after you have gotten your business into the best shape possible.
How about you? How do you deal with debt?
photo credit: Photos8.com
–
Bradford Shimp helps small businesses create web sites and web presence to bring in more leads and sales at BroadRiverCreative.com.
Measure Your Success With Profit, Not Sales
When trying to determine whether your business is successful or not you need to know what to measure. If you aren’t used to spending quality time with your numbers, you may think the easiest measurement of success in number and volume of sales. Unfortunately, sales numbers don’t do you a lot of good if you don’t understand the underlying metrics beneath those numbers.
To understand and measure where you are truly at, you need to find out what your profit is. Profit is more important than sales in the sense that it is the percentage of the sale that you end up actually making. You can have a lot of sales with very little, and sometimes zero, profit. You can also have fewer sales, but a higher profit margin on each sale.
How to Determine Profit
Determining profit is not hard if you are keeping track of your numbers. Using a good accounting software like Quickbooks makes it easy. That is, if you are recording your numbers correctly. There are two primary profit percentages that you should be interested in. They are gross profit and net profit.
Gross profit is what is left over after you pay all sale related costs. This primarily includes the cost of producing or purchasing the product. You can assign other direct sale related costs here, but the best thing you can do is study your industry to learn what the standard is. More on this in a moment.
Net profit is what is left over after all expenses, including taxes. This is the money you make in your business.
To determine profit percentage, you simply take your profit and divide it by total revenue. So, for gross profit, start with your total revenue for the year. This is all the money brought in via sales. Then, subtract out the expenses directly related to the sale, such as cost of product. This gives you your gross profit. Now, divide that number by the total revenue, and you will be given a decimal number. Convert this to a percentage by moving the decimal two spaces to the right. For net profit, simply subtract all expenses, including taxes, from your total revenue. Divide this number, your net profit, by your total revenue. Then convert that into a percentage.
The All-Important Percentage
Your actual dollar amount profit may be important you in a real world, money in hand, sense. However, the truly important number for your business is the percentage. You need to know what your gross and net profit percentages are in order to determine if you are running a successful business and to discover any tweaks that need to be made.
Find the Industry Standard
Once you have your percentages, you need to do a little detective work. It is important to find out what the standards of your industry are. The acceptable profit percentages vary from industry to industry. You need to be concerned with finding the most accurate numbers for your industry. For some, you will be able to find these numbers by searching online. Niche industries may have a harder time of it. You can try checking with an industry group. Barring that, just start asking your competitors and friends in the industry. Ask as many as possible in order to get an accurate number. You also need to determine how they come to their number. In other words, what expenses do they take out for gross profit, and which do the take out of net?
It is important to find your industry standards so that you can determine if you are on track or not. For instance, if your industry’s standard net profit is 10% and you are only bringing in 5%, you have to improve. If, on the other hand, yours is 12%, you are beating your industry and doing something right.
A Place to Grow From
Industry standards give you a goal to shoot for. If you can line up with these standards, you will likely be creating stability for your business to grow on. Once your profit is in the right place, you can focus on bringing in more and more sales. As long as your profit percentage stays where its supposed to be, you are building success.
If you numbers are lower than standard, that is likely a sign you are doing something wrong. Look for ways to reduce cost and increase profit. It is hard to maintain and grow your business if there is not a sufficient amount of profit coming in. Focus on getting your profit percentage to where you need it. The earlier you do this, the better.
Understanding profit as a measurement for success helps you in all areas of your business. Before you make a decision, think about how it will effect profit. This includes hiring decisions. You don’t want that profit percentage to sink too low. On the other hand, if all you care about is making your profit percentage bigger and bigger, you will eventually run in to trouble as well. You can artificially inflate your numbers by not adding infrastructure and employees. This will hurt you more than it helps you in the end, because your bubble will burst and you won’t be positioned to grow. Keep a steady profit percentage in line with your industry, and you can steer your business toward growth and success.
photo credit: geishaboy500
–
Bradford Shimp helps small businesses succeed at BroadRiverCreative.com.
Why is Business Planning So Hard?
Most people agree that creating some kind of business plan is important. But sitting down and doing it seems to be a weak spot for many business owners. I myself struggle with this. So I was wondering, what is so darn difficult about writing a business plan?
I think there are a bunch of causes. For one thing, small business owners aren’t as good as they should be taking time off working in their business to work on their business. The client job will always come before the meta work of the business. Beyond that, many people don’t know where to start. You may get caught up on how to structure the business plan, what to include in it, and all of those details.
I’ve picked up a few tricks and discovered a couple of resources that may be helpful in setting up your business plan. I will recommend them throughout the article. One thing that you may need more than anything else is a little motivation to write your plan. Perhaps the best way to do this is to team up with another business owner you know and to hold each other accountable and help each other through the process.
Here are my thoughts on the process, why its difficult, and how you can get through that and succeed in building a great plan for your business.
Writing It
When you sit down to write your business plan, you are confronted with a blank piece of paper. This is no good. You don’t know where to start. What you need to do before you even think of writing out a plan is to find or develop some kind of structure. Determine first what you want to include in your plan. Do you want a detailed plan that you can show to investors and bankers? Or would you rather get your plan down on 1 or 2 sheets of paper?
The simplest of plans simply includes your company goal. From there, you can put in place some ideas and systems that will help you reach that goal. More complex plans include detailed goals for each aspect of your business, current financials and future estimates, market research, and the whole nine yards. A good case can be made for both types of plans.
Mike Michalowicz, author of The Toilet Paper Entrepreneur
Tim Berry is on the other side of the argument. He is the founder of Bplans.com and has developed a great software program for writing a business plan. He advocates thinking about all aspects of the business while writing your business plan. While his plan is more complex, he also stresses the importance of crafting a living document that you keep looking at and adjusting as you grow. I really recommend using the Business Plan Pro software if you own a more established business and have not ever successfully created a usable business plan. Throughout the process of writing it, you will be challenged to do some research and look hard at your business and industry. You need to do this as you position to build for growth.
I have used both of these programs and recommend both. The nice thing about Tim Berry’s approach is that is provides a step by step process for writing a more detailed business plan. On the other hand, it is fun and easy to write your prosperity plan as prescribed by Mike Michalowicz. Either of these tools will put you on the path to actually getting some sort of plan written.
There is another option. This is an idea that I picked up from Mark Joyner, the creator of Simpleology. The process is called backward planning. If you know what your business goal is, you can easily create a plan for getting there. You just go through the process backwards. Start at your goal and then write down the thing that will happen right before you reach that goal. Then repeat the process, all the way until you reach the point that you are at right now. This will provide you a step by step plan for reaching your goal, which is what a business plan is really all about, isn’t it?
Writing a business plan is a valuable process because it forces you to think about your business goals and to work on ideas for actually achieving them. Having a good plan in place makes it easier to make decisions, to decide when and where to grow, and to keep your business on track and not get stuck behind roadblocks and waylaid by distracting opportunities that just don’t fit the plan.
Using It
A business plan is only good if you use it. Writing a good business plan and not using it is like having a map to someplace new but not looking at it. You end up lost and frustrated. Think of your business plan as a map or GPS designed specifically to help you reach your business goals.
So, how exactly do you go about using your business plan? Well, for one thing, you need to look at your plan regularly. Stop to take breathers along your trek to business success. Review your plan at least monthly, perhaps even weekly if things are moving fast for your company.
In reviewing your plan, you should be looking to make sure that you are on track. If your plan includes projected numbers, are you hitting them? If your plan says what your next step should be, are you taking that step? As you move forward, the plan should not just tell you what your future should look like, but it should give a pretty good picture of your past. Make notes, highlight important dates where goals were reached. If you fall short, think about why and write it down in your plan. Then gear up for next month.
The other thing that needs to come out of your business plan are measurements. Mike Michalowicz calls them metrics. These are the key numbers or events or activities that you need to keep track of weekly or daily. They will be your dashboard to tell you whether or not you are succeeding with your plan.
Every business will have different measurements. For one, it might be number of meetings held. For another, it could be size of average customer. Your specific measurement should come directly out of your plan. Look at your goal and then figure out what your best measurements will be to determine whether you are meeting that goal. So, if your goal is to ultimately serve larger customers, the measurement of size of average customer would be a good one for you. If your goal is to be in more markets, you want to have a quick way to measure where your business is coming from. You may need to play around with different measurements until you find the ones that will give you the best picture of your business health and the progress being made toward your goal.
Revising It
The business plan is a living document. It is your map to your goals. But it is also a map that you crafted. Maybe you thought you could go one direction, but discover a deep ravine that you cannot cross. As you move forward with your plan, you need to be ready to adapt it. Sometimes you need to make major changes, but if you put a lot of thought into it when you crafted it, the changes will likely be minor adjustments.
Don’t be afraid to make changes to your plan as you progress. The goal is to keep your business plan as a usable map. If you don’t adjust, it will probably become obsolete and be of no use to you. Imagine if we were still using the same maps of the world as we did centuries ago. At one point, people assumed the world was flat. Brave explorers changed that idea. Africa’s interior used to be largely a blank spot on the map. It is only through exploration and moving forward that we can fill in the blanks and improve our plans.
One word of caution. Don’t be quick to change your ultimate goal. Try hard in the beginning to connect with why you are in business and what you want to accomplish. Then stick with it. There are times when you may have to change you big goals. Markets change, you change, it happens. But for the most part, try to see your plan through until you reach your goals.
To that end, perhaps you should think of creating short term business plans. Take a year at a time and look at the goals you want to accomplish for the year. Let your overarching goals feed this yearly plan. At the end of the year, look at what you accomplished, and then start a new plan.
It is Still Hard
The fact is, writing and sticking to a business plan is still hard. It will sometimes just take a dogged commitment. Chet Holmes calls this pig-headed discipline. It is something that is necessary if you want to achieve real success in business. If you don’t have a plan, you may even have a hard time knowing if you are successful or not. So, do the work. Write a plan, follow it, measure it, and keep adapting it as you grow.
–
Bradford Shimp helps small business owners build successful companies at BroadRiverCreative.com.
What to Do With Customer Complaints
No business owner likes to hear a complaint about her business. This is her baby, after all. But, for better or worse, complaints happen. Things go wrong. People screw up.
When you get a complaint, what you do with it is important. A customer complaint is an opportunity to learn and make your business better, and to develop loyalty with customers. Or, if you like, its an opportunity to be selfish, to blame others, and to hide under a rock.
Too often complaints are viewed as anomalies and ignored. This shouldn’t be the case. Every complaint should be deconstructed and analysed, not to see if there is a flaw in the complaint, but to see if there is a flaw in your business. Even complaints from bad customers are important. They can highlight cracks in your organization. They may just highlight the fact that you are not doing a good enough job finding the right customer. But that is a real problem that needs a real solution.
You need to have a process for dealing with complaints. It could look something like this:
- Receive the complaint with humility. You’re not perfect, so no need to pretend that you are.
- Personally apologize to the customer. As an active small business owner, you should deal with complaints personally. Larger businesses should have as high up a person as possible dealing with complaints.
- Make it better. Talk to the customer and see how you can make it better. Let the customer lead you here. Each person will be a little different. For instance, some will want their money back, while others will want a replacement. Find out the customer’s specific need and take responsibility for filling it.
- Analyse the issue. Problems don’t happen in a vacuum. It doesn’t matter if you never received that particular complaint before, it is still a valid complaint for that person. Think through what happened and figure out what went wrong. Don’t overreact, but don’t under-react either. Here’s an example. Maybe the customer’s complaint was that your price was too high for the quality of the product. If you have never heard this complaint before, don’t rush out and change the price of the product. Instead, you may need to look at how that customer got sold, what he was promised, etc. Maybe the problem isn’t in your price, but in your selling promises.
- Fix the problem. You need to be proactive in fixing complaint causing issues. Yes, make the customer feel better. But that alone doesn’t cause the problem not to happen again. Establish a culture in your company where mistakes are not accepted, but where everyone takes responsibility for them and works together to make sure they don’t happen again. Don’t be afraid to dig in to the root causes of the complaint. It will probably turn out that the problem lies in something different than the surface issue. If you don’t dig, you may just dismiss the complaint as something out of your control. But nothing is out of your control in the business. Dig, and you may find issues in training, in vendor selection, in quality control, in attitudes and culture, or in any number of areas. In fact, the complaint may be a godsend because it will help you discover a hairline crack that will cause you nothing but trouble when you put the weight of growth on it.
A complaint can be a wonderful thing, if it is leveraged properly. Too often, you never hear the grumblings of a customer. It takes a special kind of person to confront you with your mistake. Don’t dismiss this person as a trouble maker. For every loud complainer, there are a number of quite grumblers. So embrace the complaint and fix it on the level of the customer and also within your business, no matter how deep you have to dig. Your business will benefit.
Hint: Use Toyota’s Five Whys. Keep asking why did this happen until you reach the root of the problem. When you think you have found the answer, be sure to ask one more why. For instance, you may think you have found that an employee is the problem. But why did the employee make the mistake? Was there inadequate training? Or if the employee is truly a bad apple, then why is she working for you. If you don’t dig deep enough, the problems will just reoccur. And please remember, as a business owner, every problem will eventually be traced back to you. Be humble and willing to grow.
–
Bradford Shimp helps small businesses navigate the web and bring in more leads at BroadRiverCreative.com
