March brings thoughts of Luck, Rainbows, and Pots of Gold. A lot of business owners rely a little too much on Luck without knowing how to get Gold out of their business. Here are some steps that will help you to find and generate the Gold (also called Profit) without having to chase Rainbows.
Know and Understand your Financials
The first step is to really look at and understand your financials. Basic financial statements are your regular health check of your business, and they indicate what you need to focus on and what action needs to be taken. Financial statements show where the money comes from and where it is going. You should fully understand your Balance Sheet, Profit and Loss, and Cash Flow statements. If you do not know how to prepare them, hire a CPA or bookkeeper. They can prepare the financials regularly and teach you how to read them.
Once you understand your financial position you can create a budget to manage your business. Staying within your budget will allow you to spend wisely, which will lead to more Gold/Profits. As a business owner you need to be making decisions proactively, not reactively. Management by checkbook is never a good plan.
Speaking of checking accounts, set up a separate account to house your expenses, taxes, and profits. By doing this you help ensure that the money is where it needs to be when you need it. Be sure to review all of your banks statements to make sure the money you are expecting is actually being deposited, and that auto pay expenses are accurate. While you are at it, check your banking fees. If you don’t like what you see, call your banker or shop for another, more business-friendly bank.
Set Realistic Goals
Just as you plan your day, or what to make for dinner, your business needs a solid plan. That starts with your Goals. What do you want to achieve? A certain revenue amount? A second location? A manager who oversees operations so you don’t have to be there? A new product? Goals are your GPS. They guide your actions.
Goals need to be SMART – Specific, Measurable, Achievable, Relevant, and Time Bound. “I want to hire someone” versus “I will hire a sales rep for no more than $60K by April 1, allow for 90 days of training so they can be making sales calls by July 1.”
Build an Effective Team
Chances are payroll and benefits are your largest expenses. Hiring the right people and effectively training them to be successful is a guaranteed way to find Gold in your business. It also allows you to focus on those things that only you can or should be doing.
If your priority is to increase revenue with additional sales and you need a sales rep, don’t hire your friend who needs a job but has no sales skills. Being generous with your Gold is admirable, but you have to generate it first.
Identify the skills and functions that you truly need. Create a position description for each role. Be specific about expectations and responsibilities. I recently worked with an employee at the request of the manager. The employee admitted that she was willing to do the job, however, she was getting so many different directions she did not know what she was supposed to be doing. Laying out priorities and specific tasks was a simple fix for everyone.
When someone is no longer a fit, they need to be terminated. I strongly believe in investing in people and giving them the tools they need to succeed. However, there comes a time when things are just not working. Having this person is costing you Gold, and may cost you valuable employees who are frustrated with the situation.
Track your Expenses
One way to generate Gold/Profit is to decrease expenses. Make a point of looking at your fixed expenses as well as your variable expenses. Things like insurance, internet, and banking fees tend to get overlooked. On the variable side, we know costs are rising. If your raw materials cost more, you may need to increase your prices.
Build Customer Loyalty
It is expensive to find new customers. If your customers receive great service and great value for their money, they will be back. Your job is to provide great service, and increased value to the customer. You also need to make sure that the customers understand the value that you are providing to them. Get to know your customers.
Make it easy to buy from you. Help them find the products or services that they need. Educate your customer. Online, allow the customer to set up an account that remembers their information and order history. Offer subscriptions with automatic refills.
How do you know what your customers think? Ask them. What do they like? What other products or services would they like you to offer? Where do you need to improve?
Stand by your product or service. If there has been a problem, admit it and fix it. Offer guarantees. A guarantee takes the risk out of the sales decision. Don’t forget to say, “Thank you!” to your customers.
Don’t be Afraid to Change
One way to build Gold is to be Bold. Try new ways of doing things that customers will appreciate. That may be bags or packaging that is recyclable or using less packaging. Offer a custom experience by suggesting products or offering training.
Creating new products or services is quite an investment, yet it has the potential to yield huge results. Being the first makes you stand out and gives you a competitive advantage. Innovation tells your customers that you want to always provide the best for them. Not everything will be successful, and that’s OK. You want to be the trend setter that draws people to your business. Plus, it can be a lot of fun for you and your team!
Take a look at your current offerings. Rank them in terms of popularity and profitability. Focus on the products that are generating your Gold. Consider dropping those that are less profitable.
Building a profitable business requires constant work – watching the financials and expenses, setting goals, building teams and loyal customers, plus knowing how and when to change. Sometimes it feels like you are chasing rainbows. Small improvements in each of these areas can truly add up to some finding real Gold in your business.
And remember, when you see the rainbow, it means that the storm is over.
Author: Sandy Merritt, Business Coach in Louisville, KY