Success in business depends upon knowing the basics – the things you absolutely must master in order to succeed. Here are some key factors every business owner should know:
1) What do you get for your money? Regardless of the type of business, it's critically important to always track your return on investment (ROI). This means keeping tabs on:
• What you spend your money on to operate your business?
• How much you spend in each category?
• What you get in return for every dollar you spend i.e. revenue generated or dollars saved elsewhere?
Understanding the ROI that comes with every expense makes it easier to decide where to spend money in the future.
2) Respect the saying "Cash flow is the lifeblood of every business". Nothing else is as essential to running a small business as unimpeded cash flow. Savvy small business owners do everything they can to ensure they have sufficient cash on hand to cover expenses for at least 90 days. As part of their cash flow planning they take into account that they don't always get paid in full right away, and they have to manage the time-lag between delivering a product or service and getting paid.
3) Become good at hiring the right people. Since hiring employees is a key area of ROI, business owners must know what to look for (and what to avoid). This is a necessary but at times a costly endeavor, since it encompasses the expenses incurred in recruitment and training, salary and benefits, and the time needed for a new hire to successfully integrate into the workplace. Hiring a "bad employee" and/or having ongoing employee turnover can seriously impact a small business, no matter how well sales are going.
4) Embrace social media. There is no denying that in today's market place social media can be a fundamental element of success. Whether your business is ecommerce or brick and mortar, you may benefit from establishing and maintaining a social media presence on Facebook, LinkedIn, Twitter, etc. This is where existing and prospective customers hang out – and they can't find you if you're not there.
5) Have a disaster plan in place. Bad things happen all the time and not just to other businesses. A time may come when some natural disaster disrupts or even halts your business operations. Do you have a plan for disaster and business continuity during times of disaster? Your plan should include, at the least, contingencies for covering employees who cannot come in to work, as well as alternative lines of communication with vendors in order to preserve your supply chain. You should also maintain an up to date inventory of business assets and IT equipment. The more you plan for disaster the more quickly you can recover.
Managing profits and cash flow can be a big concern for small business owners. If you would like assistance in improving profits and cash flow give us a call at 281-488-2022.