If you are like millions of taxpayers trying to make a living running a small business, you know it is tough out there. Here are six ideas to help your business survive and thrive.
- Understand your cash flow. One of the biggest causes of business failure is lack of positive cash flow. At the end of the day, you need enough cash to pay your vendors and your employees. If you run a seasonal business you understand this challenge. The high season sales harvest needs to be ample enough to support you during the slow non-seasonal periods.
Recommendation: Create a 12-month rolling forecast of revenue and expenses to help understand your cash needs each month.
- Know your pressure points. When looking at your business, there are a few categories that drive your business success. Do you know the top four drivers of your financial success or failure? By focusing on the key financial drivers of your business, success will be easier to accomplish.
Recommendation: Look at last year’s tax return and identify the key financial drivers of your business. Do the same thing with your day-to-day operations and staffing.
- Prioritize your inventory. If your business sells the physical product, you need a good inventory management system. This system does not have to be complex, it just needs to help you keep control of your inventory. Cash turned into inventory that becomes stuck as inventory can create a cash flow problem.
Recommendation: Develop an inventory system with periodic counts (cycle counting) to help identify when you need to take action to liquidate old inventory or research any discrepancies.
- Know your customers. Who are your current customers? Are there enough of them? Where can you get more of them? How loyal are they? Are they happy? A few large customers can drive a business or create tremendous risk should they go to a competitor.
Recommendation: Know who your target audience is and then cater your business toward them and what they are looking for in your offerings.
- Learn your point of difference. Once you know who your customer is (your target audience), understand why they buy your product or service. What makes you different from others selling a similar item?
Recommendation: If you don’t know what makes your business better than others, ask your key customers. They will tell you. Then take advantage of this information to generate new customers.
- Create a great support team. Successful small business owners know they cannot do it all themselves. Do you have a good group of support professionals helping you? You will need accounting, tax, legal, insurance, and employment help along with your traditional suppliers.
Recommendation: Conduct an annual review of your resources, be prepared to review your suppliers and make improvements where necessary.
While libraries are filled with small business advisory books, sometimes focusing on a few basic ideas can help improve your business’ outlook. Please call if you wish to discuss your situation.