YOUR GUIDE TO SMALL BUSINESS
Your Guide to Small Business is designed to give entrepreneurs the tools they need to succeed. It’s not a “how to” book; it’s an information resource that will help identify the things one needs to do before, during and after launching a business. |
Part 4 - Up and Running
Topics Covered:
"The biggest misconception new entrepreneurs have about running a business is that they think once you get to a certain point, you’ve arrived. The thing is, the challenges never stop. You have to be an innovator—and you have to like constant change."
Ben Hum
Xystar Technologies
Toronto
Once you launch your business you’re caught up in the day-to-day details of running it, and it often feels as if you’re in perpetual fast-forward.
But, difficult though it may seem, it’s important to make time to assess how you’re doing—and to get into the habit of doing it on a regular basis.
Assessing your progress
Probably the best way to assess your progress is to revisit your business plan. If you prepared a comprehensive plan, you established projections for where you should be at key milestones, like six months and a year.
Have you achieved what you set out to in the first six months?
- Are your sales what they should be?
- Are your expenses in line?
If not, it’s time to find out why. The sooner you take steps to rectify the situation, the more likely it is you’ll be able to turn it around quickly.
You need to look carefully and honestly at three main areas of your business—and remember, if you need help with this, contact your local Small Business Enterprise Centre.
Management
Lack of management skills is the biggest single cause of business failure according to Dun & Bradstreet, a leading provider of business information. Good managers make optimum use of money, people and other resources to achieve their goals; and they keep and interpret thorough records to evaluate changes, trends and weaknesses.
Consider:
- Are you spending enough time on activities that move your business forward, such as sales?
- Are you being as efficient with your time as possible? For instance:
• Are you out selling when customers are available and doing non-revenue-generating work after business hours?
• Are you having meetings when a phone call or e-mail would be just as productive?
•Are you prepared for meetings and do you also include an “action agenda” to remind yourself—and your employees—about next steps?
Are you the best person to sell your product/service? If not, who is? - Can you make better use of the Internet to market and sell your product/service?
- Do you need to hire more people or delegate more effectively to free yourself up to focus on key areas?
- Is your staff, including any contract workers, performing the way you want—and need—them to? If not, what steps can you take to ensure that they do? For instance:
• Have you been clear about their responsibilities?
• Have you encouraged their input?
Are you providing effective leadership? For instance:
• Do your employees understand your goals for the business?
• Have you made it clear which tasks are most important for achieving those goals?
• Do you provide positive feedback as well as constructive criticism?
• Do you reward your employees for their hard work and dedication?
Sales and marketing
It’s not enough to have a superior product or service. You have to get out and sell it. At the end of the day, if you don’t have a cash register that’s ringing, you don’t really have a business.
Ask yourself:
- Are there ways you can boost your sales? For instance:
• Can you adjust your price or modify your product or service to better satisfy your customers?
• Can you make better use of the Internet to keep existing and potential customers informed about new products or services? - Have you developed good relationships with your customers?
• Have you asked them for feedback and acted on it?
• Have you been keeping records on your customers and tracking what they purchase when, what they spend and how they pay? - Are you getting referrals from your customers? If not, why not and what can you do to encourage them?
- Are you attracting any of your competitor’s customers? If not, why not and what can you do about it?
- Is your message on the mark or does it need refinement or change?
- Are your advertising efforts cost-effective? If not, what can you do to get your message out more cost-effectively?
Financial
In the final analysis, it all comes down to your financial health. One of the most common financial problems for small business is not a lack of revenues, but the uneven timing of them, which can lead to cash flow problems. In order to avoid a sudden lack of cash it is a good idea to keep rolling cash flow projections. A cash flow statement is simply a picture of how much cash you have at a particular time. Your accountant or bookkeeper can help you put together a rolling cash flow that you can use to project cash shortages in the future. That way you can plan expenditures around shortages. The acid test of your general financial health is your quick ratio—your current cash and receivables versus your current liabilities. If your quick ratio is below 1.0, you’re in trouble. And even if it’s 1.0 or better, there may be things you can do to improve on it.
Determine:
- Are your customers paying on a timely basis? If not, how can you get them to? For instance:
• Are your payment terms stated clearly on all invoices?
• Are they too generous (compared to industry standards)?
• Have you got a plan of action to collect your accounts receivable?
Are there ways you can reduce your costs? For instance:
• Can you find a less expensive supplier or suppliers?
• Can you cut back on inventory and make purchases more efficiently?
• Can you cut back on client entertainment?
• Can you put off making major purchases?
If you need help tracking down the cause(s) of your problems—and coming up with solutions—get help:
- consult with your accountant
- brainstorm with your colleagues and/or employees
- meet with your local Small Business Enterprise Centre (SBEC) consultant or business mentor
- consider taking business courses at your community college or high school
- establish an advisory board
When you’ve finished your assessment, adjust your business plan accordingly—and make a note to review it again in three to six months.
And remember, as any successful entrepreneur will tell you, the only constant in business is change, so learn to embrace it! Be alert to changes in the economy, your industry, your market and your customers and be ready to respond quickly.
Finally, learn from your mistakes. Examine where you’ve gone wrong and develop a plan for avoiding similar mistakes.
Spotlight on… Two Stage Innovation Inc. (TSI)
If you ask Eric Grant-O’Grady what’s the single most important quality an entrepreneur should possess, he’ll tell you it’s determination.
That’s what helped him go from being an employee at a Tier One automotive supplier to co-founder of Milton-based Two Stage Innovation Inc. (TSI), a successful multi-million dollar company specializing in custom systems integration for the automotive, environmental and aerospace industries—and one of Profit Magazine’s 50 hottest start-ups for 2002.
“I came to Canada with few prospects but with a strong desire to succeed,” says Eric, a native of England and a graduate in mechanical engineering, who was awarded the Business Development Bank of Canada’s 2003 Young Entrepreneur Award for Ontario.
“It all started with small design contracts that my partner and I would do while we were working in the automotive sector,” he says. “As demand for our services grew, we decided to launch our own business in 1998.”
They began with just the two of them in a 200-square-foot office. Before long they got their first big order.
“We knew we couldn’t manage it on our own, so we hired somebody,” says Eric. “Then we got an even bigger order and we hired some more people. That’s how we grew—by necessity.”
“When you start a business, you can’t just go out and hire all the people or buy all the equipment you think you’ll need eventually. You have to get the orders and then you grow.”
And, as Eric points out, to keep getting orders, you have to keep innovating.
“Basically, if a company wants to assemble something that an employee is currently doing, we’ll design and build them a machine that will do it quicker and with more accuracy,” he says.
Today, TSI has a dozen major clients, employs 23 people full-time and is a premier supplier of robotic systems. In fact, the company has developed an award-winning Robotic Tape Technology, the only technology in the world that uses robots to automate tape applications.
Successful here at home, TSI is now turning its focus to the U.S. and European markets.
What’s been the hardest part? “Being an entrepreneur means long hours. It means thinking about your business all the time, even on vacation. You really have to want to do it—and you really have to have your family’s support and understanding.”
