Your business is more than finance. Your business is a combination of things.
Running your own business can be fun, or it can be painful. If you understand that Revenue minus Cost of Goods Sold equals your Gross Profit (some people call this Gross Margin), that is a good start. From that gross profit, you must pay your other employees, your rent, utilities, taxes, insurance, etc. Then, by the way, you must pay yourself and have money left over to set aside for reinvestment in your business or those times when your revenue isn’t where you want or need it to be AND MAKE A PROFIT.
Knowing those very basic financial fundamentals of business is critical to your success. Many small business owners struggle with that. They are quite good at something, but may not be good enough at everything it takes to run a business. Never the less, they have businesses that are good enough. They make enough to pay the bills, put a roof over their head, clothes on the family and food on the table. GOOD ENOUGH, BUT NOT GREAT.
To have a great business requires more. More is not just more revenue or more customers. More is a passion. A passion for the business that says “This will be great, we will never settle for just good enough.”
How does the business owner do that? They do it by focusing on what is important, getting rid of what isn’t important and they don’t make foolish mistakes with unrealistic expectations of their business. I am not talking about the new business owner who got a business loan so that they could have an income. I am not talking about a business owner who has a business so they can buy their friend’s lunch and drinks while charging that to the business. I am speaking of a business owner who is passionate about being a SUCCESSFUL SMALL BUSINESS OWNER.
So again, how do they do this?
Running a GREAT SMALL BUSINESS takes attention to detail. There are 8 different areas that a small business owner must be aware of besides simply the financial health of the business.
Production or Service – is it done within quality standards and without error? Error is money out the window and that reduces your profit.
Product Management – Are you aware of the cost of your materials and how it impacts your business? Are you producing or providing profitably? Are your materials languishing in long held inventory where they may become damaged and unusable?
Marketing – do your marketing efforts address your customers, qualify them and provide you with sufficient new first-time business opportunity?
Sales – do your sales efforts focus on new first-time business and managing the new contracts of that new business?
Customer Service – does your customer service offer value added upselling? Do they effectively manage your customer orders?
Customer Retention – Do you have a customer retention strategy and does it directly involve you the owner? Is a part of this strategy recovering former customers who no longer buy from you?
Team Development – How do you obtain the engagement of your workforce, your team? Does it reward them for value added contributions and encourage their active participation?
Waste Management – Do you have processes in place to reduce waste across your business? Does this strategy drive improved productivity and efficiency?
Each of these 8 areas must be developed and managed daily. They must be measured for their productivity and those responsible not only held accountable for that productivity but also rewarded for their efforts. It is through the management and leadership of 8 key business functions while understanding how they relate to the financial operations of your business that will distinguish you from good enough to GREAT.
A business is made up of many parts. You must pay attention to them and ensure they work properly. Like anything in business, if you manage it and measure it, it will be of value to you. Don’t measure it, don’t manage it, even if that is an activity you do not like, will drive your business to good enough or worse, out of business.
If you don’t know how to collectively manage all of these critical parts of your business fund someone who can help you. Someone who can not only teach you how to do that but will give you the training and tools necessary to use these parts to make your business great. Focusing on only one or two will be of little value. Focusing on them all simultaneously will set you well ahead of your competitors – and that will make you a GREAT SMALL BUSINESS.
We specialize in making GOOD SMALL BUSINESSES GREAT SMALL BUSINESSES.