Top 5 Tips for Small Business
Success
I’ve served as a small
business finance broker, a business broker and have been working for years as a
small business consultant.
I’ve seen a lot of financial
statements and seen and a lot of people be successful and have spectacular
failures in their businesses.
I was recently asked by Fundera.com to
summarize what I thought were 5 keys to small business success. Fundera is a marketplace where all kinds of different small business finance sources come together to help finance small businesses. Here they are:
1.
Know your gross margin and make sure it’s right. Too often
small business people don’t know what their margin should be. This leads to a failure to increase prices
when costs go up and a failure to build in all the costs of doing
business.
2.
Have a good record keeping system and reconcile
quickly each month. Even if you know what your margins should be,
if you’re waiting for your accountant to prepare financial statements months
after your year-end, you’re too late.
You need to be able to know for certain if you’re hitting your margins
each month. If your business has a lot
of inventory, this can mean counting inventory EVERY MONTH. Otherwise, you won’t know your cost of goods
sold and you won’t know your margin.
3.
Understanding the difference between debt and equity
on your INCOME STATEMENT. Debt and equity are usually found on your
balance sheet but they can also be hiding on your income statement. Hire a new worker and you need to pay them
each and every hour whether or not they’re productive. It’s like borrowing from a bank, you need to
pay them back. Commissioned salespeople
only get paid when they produce. That’s
like having a partner in the business without actually making them a partner.
4.
Getting the most return with the least investment. It always amazes me how small business people will
get themselves into debt to purchase vehicles, machinery, buildings, etc. Big businesses know that you deploy your
capital where it gets the biggest rate of return and use leverage as much as
possible. Leverage doesn’t have to be
debt! When you lease property, you’re
leveraging the landlord’s capital. When
you rent a truck, you’re leveraging the rental company’s capital. If you can’t make money serving clients with
leased and rented gear, what makes you think you can deliver those things
yourself to your own business at a lower cost?
5.
Understand your customer journey. Many small business people fail to appreciate the
‘journey’ their customers go through from the time they decide they need a
product or service until the time they’re finished shopping. When I was a corporate employee, I didn’t eat
at restaurants who wouldn’t accept AMEX.
Why? Because my employer had given me an AMEX to pay expenses. If a fantastic restauranteur didn’t accept
the card, it meant that I had to pay with my own money, submit an expense claim
with receipts, mail it in, wait for weeks for a cheque to come in the mail,
then stop by an ATM to deposit the cheque.
Alternatively, a restaurant who took my AMEX didn’t cause me any
grief. Too many chefs are worried about
the food and forget that they may actually be selling relief from hunger and
paperwork.
My biggest tip for success
though in small business is not to start one. Get a profitable business with
customers and staff on your first day by buying an already successful company.
In fact, it’s such a great value I may
increase the price again shortly. (The
course works out to about $20/hr. and comes with a 30-day money-back guarantee!) You can see how my whole buyer system works
in this video from a few weeks ago: https://youtu.be/ooixMSaFf6Y
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