Insights, Ideas, Results
Is there such a thing as “right” business for you? It is a fact that not everyone is suitable to become a small business owner. There are signs that tell you whether you will succeed in owning a small business. But once you know that you have what it takes to be a small business owner, can you take it one step further and figure out which type of business will be a good fit? I think the answer is YES.
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Majority of small businesses fail in the first three years. As remarkable as this statistic is, it doesn’t stop number of aspiring entrepreneurs from pursuing their dream of owning a business. They think about their idea as the best thing since sliced bread was invented and are convinced that there is a huge untapped market out there that nobody as cracked. They have run their idea by close confidants and got their endorsement. Uncle Bob likes their product and Aunt Ann can’t wait to get her hand on it. There is only one problem. It is still an idea in your head!!!
So how do you go past this “pie in the sky” idea stage and make it a reality? Even more important, how do you know that this idea will succeed and will not leave you with agony and angst when it’s all over?
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Cash flow is a lifeblood for small business. Fail to plan properly for the month-end cash flow needs and you will start losing your sleep when the time arrives to write paychecks for employees or to pay vendor bills. That’s why it is very important to keep a keen eye on money coming in and going out, and plan for those times when you will need sizeable cash outflow. Not only that, but you have to take into account unexpected emergencies that will force you to spend money here and now. In earlier post, we showed how managing your inventory, account payables and receivables can help you better manage your cash flow.
In addition to those tips, you should also look at the obvious as well as not-so-easy-to-find ways in which small business owners squander cash and end up in dire situations. Here are examples of the mistakes many small business owners make and how you can avoid them.
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Cash flow management is one of the most important tasks small business owners need to pay attention to. If you are not paying attention to how your business generates and spends cash you may end up in real trouble, real fast. Cash flow management touches many parts of business, including inventory management, accounts payable, accounts receivable and so on. Below we provide you with insights that will help manage your cash flow better.
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This blog post is written by Shannon Martin.
Most small businesses are overpaying for credit card processing. In our conversations with number of small business owners we have not come across a single owner who does not hate credit card processing companies for the exorbitant amount of money they charge. That is why it is important to do your homework before you sign up with the merchant processing company. In this post we provide useful tips you should keep in mind when talking to credit card service providers.
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In the previous post we highlighted that the most difficult decisions you will ever make are the ones where you decide NOT to move forward. By focusing your resources and energy on narrowly you can achieve number of benefits and get higher return on your investment of time, money or effort. We mentioned how Apple has succeeded to become the most valuable company in the U.S. by applying this principle, while GM had floundered by spreading resources over multiple brands with lot of overlaps.
You should use this approach in decision making every step of the way. If you take a step back and think about the decision in terms of cost vs. benefit of the current choice and evaluate it against alternatives you can improve the odds of making the right choice. You can use this principle in number of different areas as shown below.
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“I didn’t know we were in such a bad shape! How could this happen?” How many times have you heard this from a small business owner whose business is shutting down? For small business owners it is imperative to stay on top of the business like a hawk. Otherwise it is not surprising to wake up one day and find that you are not able to pay your employees or make interest payment to the bank.
We mentioned in earlier post that you have to be able to tell how your business is doing even when someone asks you in the middle of the night. We suggested that you identify key parameters for your business and look at daily, weekly and monthly reports.
We have been asked by number of small business owners if there are simple warning signs that can tell them if the business is headed for trouble – something akin to early warning system. In response, we have come up with 5 metrics that can tell you exactly that. By keeping a keen eye on these metrics you can detect potential problems well in advance and take appropriate actions to correct the path.
Here are those 5 metrics along with explanation of how to calculate them:
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In the previous post we showed a systematic approach you can use to reduce cost in small business while still keeping your foundation intact allowing you to take advantage of the upturn in economy when it happens. We suggested that you should take surgical knife approach to cost reduction as opposed to using machete.
By applying this approach your business may come up with tactics that will be different from some other type of business. You have to tailor the systematic approach to your business and situation. However, there are common tactics that can be employed by almost all types of businesses. Below we describe those techniques categorized by stages in the cost reduction approach.
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A penny saved is a penny earned. This age-old saying is relevant to small business owners now more than ever. The great recession of 2008 has squeezed consumers and businesses alike and continues to do so. They are reluctant to spend their hard-earned money on anything but basic necessity. This has made direct impact on the revenue, particularly for small businesses.
Given that there is less money coming in, the obvious step small business owners need to take is to watch the money outlay. Only those who can reduce their expenses to a sustainable level will be able to survive the ongoing economic challenges.
Now, it may be tempting to take a machete and start cutting your expenses; however instead of going about this willy-nilly you should try to use surgical knife and make systematic cuts that will keep your foundation intact and help you take advantage of the upturn when it happens. We have come up with a systematic approach to looking at your expenses that will help you find “low hanging fruits” for expense reduction without impacting your operations and customer service. You should study and deploy these steps in the order described to minimize the damage, while still achieving your expense reduction targets.
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We have discussed in the past how challenging the last 2 years have been for small business owners who want to borrow money to start or expand their business. The Great Recession of the century has made banks jittery about taking on risk and lending money to small businesses. We have also mentioned some creative ways you can use to start business with little money.
Recently we came across a new startup that aims to help small business owners find lenders who are willing to give them money. The startup is called Lendio The goal of this web start up is to “help small business owners find right business loans in a matter of minutes.” According to their web site they can do this with a simple 3-step process – 1) Business owners answer simple questions about themselves and their business. 2) Lendio looks for a match between your loan needs and over 3,000 banks and other lenders. 3) Business owners apply to multiple lenders on the web site and get status updates.
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