The Only Five Small Business Tips You Need
Every day, you as a small business owner face competing priorities. These include where to focus not only your time and attention but also your resources. With every changing priorities, it would be nice if there was a roadmap that guided you to small business tranquility.
Unfortunately, I like most of you have yet to find that roadmap. So what’s an owner to do? Well, we need to look for guidance in things that have worked in the past as well as focus on those priorities that will provide the most incremental value to our employees and the business itself.
Guidance, in this case, can come from tips that could be considered best practices. Small business tips in the context of this post can be defined as not the only correct way to do something, but the most likely way that will lead to a positive outcome. These positive results could be higher profitability or more personally, additional time with family and friends.
Let’s unpack five small business tips that will help you prioritize and may also reduce some of the stress associated with running a business.
1. Keep Score
Keeping track of the finances of your business is critical. Without a historical record of the financial performance of the company, it could be said that there is no real business. By documenting revenue, expenses, assets, liabilities, and other financial items, you can track and trend performance. These performance trends can be then used to understand the overall viability of the entity.
There are many tools available to the business owner to accomplish this – many are even free. We recommend having a monthly process that allows you to take time to work on your business. This can look like reviewing the same set of reports each month to look for patterns. Perhaps it’s combining the review of financial statements with the context of your customer growth that month.
2. Inspect What You Expect
To inspect what you expect is a statement that I’m sure you’ve heard countless times. But what does it mean? Simply put, if you expect revenue to increase you need to inspect or develop a way how to make that happen. Wishing won’t make it happen, but a plan with the goal in mind will get you that much closer.
One way to measure if your expectations are lining up with reality is to expand your monthly financial review to include the examination of pertinent KPIs and metrics.
Measuring metrics and KPIs against a predetermined baseline will allow you to quickly assess if you are going to meet your revenue growth expectation. Inspecting these metrics and KPIs routinely will help shape a business’ future.
Develop a routine to review your financial statements and KPIs/metrics on a set schedule. Whether that be daily, weekly or monthly it’s your choice – but please review them often and consistently.
The routine will look different for every company. It’s the practice and consistency that counts. The more time you spend working on the business, the better aware you are of the nuances.
3. Price Well
Beware of competing on price alone. But, the price of your product/service ultimately dictates the bottom-line profitability of your business. While you can control expenses to increase margins, pricing your product/service well will make this a choice, not a mandate.
To price well, you need to understand the value of your product/service. What is the market willing to pay for it? What differentiates our offering that I can charge more for it than my competitors? Can I improve my offering to increase the price?
Knowing the answers to these questions will help you understand the value of market offering and allow you to price according. This is known as value-based pricing. Value-based pricing goes beyond a dollar value on a product or service and incorporates the overall value of offering.
For example, Dropbox enables the secure and simple transfer and upload of large files. The value of Dropbox is varied. It provides different value to each client that uses the service. For some clients having the ability to upload their work to a client quickly means that they will be paid faster. The value of Dropbox to this individual is way beyond the $9 or so per month it costs them.
4. Do Your Homework
Before entering into any new business relationship, new market or any other potentially financially impactful move, do your homework. Have a keen understanding of how this move will impact the overall financial health of your company.
Think beyond the obvious items such as funding or expenses and determine the true opportunity cost of entering into that financial commitment. What intangibles do you give up? Be sure to value your time and other “soft” costs to calculate the full intrinsic costs of any agreement.
This is especially critical when it comes to Legal obligations. Legal obligations can lead to the downfall of a company. Spend the time and money necessary to ensure that you are legally protected. Make sure that in any agreement you understand how to get out and what that will cost you.
Chasing “shiny objects” or current business trends or fads can lead your small business astray. Understand what your Core Competencies are as a business and work on enhancing them. This does not mean that you shouldn’t look to entering new markets or broaden your product/service offerings – but do so strategically.
Being a “sexy” business is does not necessarily mean that is it is a sustainable business. I would much rather own a very “unsexy” business that earns healthy profits year, over year than a company that is focused on the latest trend.
So those are five of the many small business tips that you can adopt to guide your organization. While not the gospel, these Small Business tips can help you prioritize and maintain focus. Keeping these Small Business tips in mind as you manage and ultimately grow your business will help you remain viable, profitable and successful.
Bookvalu is QuickBooks Forecasting, Ratio Analysis, and Valuation software that provides financial visibility and insight for your Small Business.