Monday, April 22, 2019

What Business Are You In? 10 Tips for Small Business Success

“If you don’t know where you are going, any road will get you there.”

Unfortunately, today’s businesses, companies & retailers don’t have a GPS offering directions.
But, no matter what you’re doing today, you need to stop, take stock and decide – what you’ve always done – but what you should be doing to run a successful business.

Back in the 1990s, my CEO boss was fired and I was “invited” to leave with him.  With a daughter entering an out-of-state college, it was panic mode.  While searching for a job, a contact at a large corporation asked me to give him a proposal to manage a series of meetings for his company.  Writing the proposal for him was easy; coming up with my fee for the assignment was difficult.  So, I asked friends, most had no idea.  When one heard the client’s name, she said “charge a lot.”  And, I responded, “What’s a lot?”

Well, I got the assignment.  And, in the next 12 months, I acquired additional clients and had to hire staff and rent office space.  It was then that I realized rather than finding a job, I had started a company!

Now what?  I did not plan on starting a business and I had no training for it!

During this discovery process, I realized most of us have little education or training about how to run a business.  Most of us are professional specialists with little to no business knowledge.  That’s one reason most small businesses go out of business.

Fortunately, I had many mentors to guide me as I built my company in scope and in number of employees.  I ran in to cash flow problems more than once in the first 10 years.

Based on my experience, here are some key questions for small business owners:

1.   Do you know how to read your financial statement?  Do you know what it tells you?

2.   Do you monitor and project your cash flow?

3.   Do you know how to establish financial systems to protect against fraud and embezzlement? Use a Certified Fraud Examiner to establish your financial system.  Trust but verify your staff.

4.   Do you know what your staff/employees cost?  Are you looking at total cost: salaries, FUTA, SUTA, health care, retirement, etc.  In my case it was 2.5 times salary.

5.   Do you know the tipping point between profit and loss?  In a service business like mine, anytime my personnel costs exceeded 60% of total revenue, I was losing money.  As an agency friend told me, “it’s better to be a half-staff short than a half-staff long.”  When I started pushing close to 60%, I knew it was time to find another client and/or reduce staff numbers.

6.   Do you know how to take advantage of the internet and big data to benefit your brick & mortar operation?   Your customers and potential customers expect your company to be internet-savvy. Blame it on Amazon!  If you’ve ever purchased something via Amazon, you know they send reminders saying ‘because you liked x, y or z, you may like this.”  Just the other day, my wife received this email from Bed, Bath & Beyond. 

Interestingly, my wife who had been complaining about her pillow but hadn’t acted on it. Think of its power for the store.  It “drove” her to the store to purchase a new pillow.  That is the power of the internet and the use of Big Data to personalize messages to your customers.

7.   Do you worry about competition from Big Box Stores?  Remember, your staff can be your competitive advantage ... IF ... you hire right and develop the skills/expertise they need for your to prosper.

8.   Do you have an exit strategy?  When it comes time to “get out of business,” how will you do it?  Just close the doors?  Turn it over to a family member?  Sell it to someone?  One of my mentor’s told me “every business owner should assume he/she will sell it at some point.  So, build your company, its systems and its profitability with a buyer in mind.”   And, when it’s time to sell, hire a business broker to sell it for you.

9.   Does your business focus on a specific area?  Or, are you more of a generalist?  (Tom Shay shares his story of his retail store.  Should he sell only one brand of paint thus being an "XYZ brand store" or should he sell multiple brands and be a "Paint Store?".) When I first started my own association management business, a company offered me a contract to research and write a company brochure.  I asked a mentor for guidance: “Steve,” he said, “do what ever rings the cash register.” 

I followed his advice with success for 25+ years: I managed associations (my core business); managed meetings; implemented public relations campaigns; gave paid presentations; led team building exercises; facilitated strategic planning and more.

What’s going on with your company, business or industry?  What are you doing?  Are you ringing the cash register or wringing your hands wondering how to survive?

10. The key question for all of us: “What Business Are You In?”

My oldest brother ... an orthodontist ... showed me the way.  He straightened teeth (what he did).   But he recognized he was in the business of creating happy smiles.  So, he created a SMILE MAKER persona and used it on his business cards, in his ads, on his license plate and even the name of his boat!  By the Way: My brother also shared that dental school only taught him how to be a dentist and did NOT educate him about how to manage a dental practice.  He had to learn that on his own to survive and thrive Much of his business strategy and success came from a Study Group created by and facilitated by one of his major suppliers.

When facilitating strategic planning, I include focus on a 2-part question:
     “What do you do?
     What business are you in?”

A year ago, I asked “what business are you in?” during a planning session of a multi-million dollar company.  It got interesting responses:
     The retailer and distributor members of the task groups thought the company should be  focusing on solutions, helping businesses be better businesses, etc.
     Meanwhile the participating company staff responded “but, we’re a manufacturing company!”

My response to them:  “Manufacturing is what you do not what business your are in!”

And, I added, if you don’t help your retailers improve their businesses and they go out of business, how much longer will your manufacturing company survive??

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