What is your financial aim? How big are you going to grow? By when? What kind of profit margin are you aiming for? Do you have your finger on your expense revenue ratio?
Highly important questions in good times; in hard times, these particular questions are even more important.
Cash…is to a business as oxygen is to an individual: never thought about when it is present, the only thing in mind when it is absent.
– Warren Buffet
If you believe that you should be making more money than you are, are wondering where the last five years went and how you ended up with the bank account you have at the moment, you need to read this article. Your financial status, your growth plans, your profit margin and your expense/revenue ration are all aspects of running any business and on which you need to have a close watch and the big picture in order to survive Economic hard times.
Actually, if you want to be successful, you need this attitude and keen focus at all times! It’s just that economic hard times hit us all in business, and we need to have a clear and clean strategy to deal. Simplify! Create structure! You have to be really, really clear about that this is the business you want to be in and where you want to go with it.
“A business has to be involving, it has to be fun, and it has to exercise your creative instincts.”
– Richard Branson
There are always reasons why most of us running our own businesses end up in financial difficulty. During tough economic times, you need to turn around, pay close attention to the basics, and develop some strict routines that you stand by. It’s a bit like starting over. But taking the attitude of a business owner just getting started is a good plan when times are tough. It takes planning, running a tight schedule and a tight ship.
You need to do everything better than the next company offering the same product or service. You need to re-educate your staff to customer relations and treat your customers – and your suppliers – better than anyone else.
“The successful man is the one who finds out what is the matter with his business before his competitors do.”
-Roy L. Smith
If you have to decrease your profit margin and give your customers a deal during these times in order to keep them with you and stay afloat, you do it – always with your eye on that bottom line. You can always revisit the situation again later.
If you’ve been relying on word of mouth and have cut back on the advertising, you need to go back and revisit your marketing strategy. It may also dip into your revenue stream, but managed with care, you can up your advertising.. You just need to take care to advertise in the right places for the right reasons for the right clientele.
If you have places where efficiencies are not what they should be, you need to analyze the causes, ask your employees what they see and what they think, then make a decision about how to up the ante on production or service times and decrease the downsides.
If you find yourself doing your financial books at the end of the day or burning the midnight oil, are frequently behind the eight ball in getting your invoices out, and you are frequently struggling to hit the deadline or late when tax time comes around, you need to read this article.
There are, in running your own business, three basic rules:
1. Run a business that entails doing something you love doing
2. Do your books when you are alert, wide awake, and operating at high speed
3. Take time to step back and take a look at the big picture
Rule#1 is there because you have to know that you are going to spend – or are spending – a good part of your 24 hour day, in the early stages, working on this business. To do that, you need passion and a vision; passion and a long term strategy.
It is often, in the early stages, a 10, 12, 16, and sometimes a 22 hour a day deal. A few make it a 24 hour deal and then crash. This is not a great way to run a business unless it is seasonal (think Santa and toys) or you run a periodic service that has high demands for short periods of time. Even then, searching for a better way would be a good idea. With that much time invested, you had better love what you do – and learn how to remember that love for that business when the going gets rough – as it will.
But…the idea is that it gradually become less chaotic, less stressful as you learn the routines that work for you, and if you do it right, when the revenue begins to flow in, you can hire someone to take part of the load that does not absolutely require your input or supervision. Then you get to do what you love best!
And what you love can change.
Rule #2 is there to ensure that you know that when it comes to money, you need to pay attention – close attention. More must come in than goes out. You have to make a living, and you have to provide service or product that holds value for your customers – and get paid!
To one degree or another, a lot of your success is based on how you feel about money, how you feel about: working with it, making it, saving it, investing it – in your business and for future personal use.
If you are not clear about how you feel about doing well financially, you may end up subconsciously sabotaging yourself. So get clear! Lay it out on paper about what your financial goals are for your business (how big are you going to grow; what kind of profit margin are you aiming for?), and what are your personal goals? In a tough economy, you need to keep those goals in mind daily in order to keep yourself motivated and energized. You also have to believe them!
We all naturally want to become successful…we also want to take shortcuts. And it’s easy to do so, but you can never take away the effort of hard work, discipline and sacrifice.
– Apolo Ohno
If, when starting out, you don’t understand accounting, you may want to take an online course, find a text, or hire an accountant – always a good idea in any event, but particularly once you really start increasing your earnings. But in the beginning, there is usually just you. You need to know the difference between accounts payable, and accounts receivable. You need to know how to document what you earn and what you spend. There are too many new business owners out there who are not keeping track of expenses and revenue, do not have a good system in place and who cringe at the thought of doing the books.
For those of you who are just starting out, where do you go to get informed?
- Visit your local bank.
- Work with the business development bank if you have a great idea for a business and have the beginning of a plan it is a good place to go.
- There are small business associations in your province or state. Many of these services initially are free.
- Talk with an accountant.
- Talk with another person in the same or similar business – or any business. Ask what they did in the beginning and what they do now.
- Find a mentor who has done it before. And…
- Hire a coach to help guide you through the sift and sort among the ideas, the plans, and strategies. A good coach should not tell you what to do, but act as a guide, someone who asks the questions you need to be asked in order to find your way to the answers that work for you and your business.
You definitely need to track your expenses and revenue in a program that can make it easier for you. If you are a micro or small business person, you are likely the one doing the books – one place to go is Wikipedia!! You can learn a lot there. Google accounts payable, and start reading. Click the links. It will lead down a path that will give you a lot of information that will save you time – and money! But it is a long process to educate yourself.
As for digital accounting for small businesses: Check out Quicken, Zoho, and google the question about small and mid-sized business financial software. Focus your question for your situation. There is much there to learn. Again, a coach can help speed you through this jungle of information, and a mentor can tell you stories of what has and has not worked for them.
If there is one piece of advice I can give you, it is to develop a schedule to do the accounting. Do tin the morning – before noon! Or pick a time when you know you are alert, keen, and clear-headed! Understand what you need to do to keep your accounts in order. find a system that works for your personality type, your business and your accountant or tax person, or that is going to make easy work of your submission to the tax office at the end of your business year. If you set the system up in advance, it all gets easier. If you leave it to languish to the end of the year, it is utterly painful. Many can attest to that! Including me at one point in my life.
Rule #3 is there to remind you to step back so you can get the big picture. If you do not have the big picture, like reading a map, you can’t see where you’ve been, the direction in which you are headed, or if you slipped off onto a side road. That can spell disaster in business management. You need to make sure you take the time to stick your head up and look around at what is happening in….the big picture.
Times are tough right now. The future is always dubious. In business, that is both the challenge and the inspiration. Take heart. As the words below say, Believe, Focus, Think, Plan, and Do. You can do whatever you dream of doing.