Success in Business Depends Upon Knowing the Basics
For over 30 years, Small Business Week — sponsored by the U.S. Small Business Administration (SBA) — has highlighted the enormous impact that entrepreneurs, small business owners, and others have on the American economy. This year the event takes place from May 4–8, with planned events scheduled for Miami, Los Angeles, San Antonio, New York City, and Washington, D.C. Other recognition events are slated for the rest of May and June. The theme for 2015 is “SBA: Dream Big, Start Small.”
Small Business Week is a great opportunity for first-time and veteran small business owners to brush up on the basics — the things they absolutely must master in order to succeed in the marketplace. Here are some key business factors every entrepreneur should know:
1. Where the money is. 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
- How much you spend
- What you get in return for every dollar you put out
Understanding the ROI that comes with every expense makes it easier to decide where to spend money in the future.
2. Respect the adage, “Cash flow is the lifeblood of every business.” Nothing else is quite as essential to running a small business as unimpeded cash flow. The expenses you incur should, as much as possible, be paid by the cash you derive from the sale of your product or service. The best way to achieve this goal is by closely monitoring every financial statement and maintaining a balance sheet that accurately measures assets, liabilities, and the business owner’s equity.
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 that they have to manage the time-lag between delivering a product or completing a project and getting paid for it.
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) when hiring a new employee. 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 employee 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. Don’t immediately hire the first person you interview, even if the situation cries out for filling an open position. Follow all the required steps and take time to make your hiring decision.
By contrast, if the new employee turns out to be the wrong fit, make a genuine attempt to rectify the problem but don’t hesitate to take the appropriate steps to let that person go if things don’t improve within a set period of time.
4. Embrace social media. There’s simply no denying that in today’s marketplace, social media can be a fundamental element of success. Whether your business thrives chiefly online or in a brick-and-mortar setting, you may benefit from establishing and maintaining a social media presence on Facebook, Twitter, LinkedIn, and other popular sites. After all, this is where existing and prospective customers often hang out — and if they can’t find you there, for all intents and purposes, your business may not exist. Be sure you have a carefully crafted company profile on the social media sites you (and your target audience) frequent, and consider engaging in online discussions and industry-related chats.
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 either disrupts or completely halts your business operations. Do you have a disaster relief or business continuity plan in place to handle such an emergency? Such a plan should include, at the very least, contingencies for covering employees who can’t get to the office, as well as alternate lines of communications with vendors in order to preserve the integrity of your supply chain. You should also maintain an updated inventory of business assets and IT equipment. The more you plan ahead for potential disasters, the more opportunities you have to recover quickly and keep your valued customer base intact.
The SBA’s Small Business Week is a time to celebrate the achievements of entrepreneurs everywhere across the U.S. Knowing the basics and staying informed on changes in the marketplace can help ensure your business will be part of this celebration for years to come.