Approximately one million new businesses are started every year in the United States. About 80 percent of all new businesses will fail within five years.
As the manager of a small business, you must wear several hats. Never stop investigating new ideas to improve all areas of your business. The astute manager will gather information to assist him or her in making the changes necessary to stay profitable in a competitive business world.
Here are some tips to help improve your profits:
Listen to your customers. You are not really selling products or services; you are selling customer satisfaction. Satisfied customers return to spend more money and are likely to refer new customers to you.
It is estimated to cost ten times as much to acquire a new customer as it does to retain a current customer through good customer service.
If your company runs well now in your absence, it will run well in the event of your disability or death. If you are currently indispensable, start training people now. One of the most rewarding forms of retirement is to own your own company and to be absent as much as you like.
The word ability spelled “A.B.I.L.ity” could stand for Accountant, Banker, Insurance Agent, and Lawyer. These professionals handle a variety of business problems every day. They make excellent sounding boards for proposed transactions. Consulting with them before you conclude any deals can save you many problems.
You can be your own best business troubleshooter. Consider arranging a trip to visit a half dozen businesses just like yours, but outside your trade area. Discuss products or services, customer relations, vendors, physical plant and equipment, and financial statement information with these noncompeting colleagues. Arrange a five- to ten-day trip. Take your financial statements, a copy of your floor plan, your camera, and a long list of questions. When you return, you will be able to inform your staff of all you learned. This trip is especially beneficial if you are not affiliated with a franchise business.
Every business should operate from a budget. Your last year’s financial reports serve as an excellent guide to setting this year’s budget. Since it is designed with the best information you have available at the outset, the variances from the budget figures may give you valuable information in preparing the next year’s game plan.
Before you start a new business, be sure the community can support such a business. Some areas are not large enough to warrant certain specialty shops. A bicycle shop, for example, may take a population base of 50,000 people to make it profitable. A grocery store, on the other hand, can be profitable in a town of only a few thousand.
Is it necessary or profitable to have accounts receivable? Credit is necessary to attract some business, and it is profitable if properly managed. For example, a construction company finds it impractical to issue credit cards to all its employees and inconvenient to use a check for every purchase. In exchange for the courtesy of an open account, such a customer should be willing to pay immediately upon receipt of a billing statement.
Business deals and special franchises which sound too good to be true usually are. We will gladly assist you in reviewing any new purchase or business proposal.
Business partnerships (marriages) seldom have the same courtship afforded most marriages. In the absence of this courtship, you should have your attorney draft a well-written partnership agreement. It is also important for family partnerships.
Don’t incorporate your business without first checking the long-range tax and nontax considerations. There are many small corporations that would have been better off operating in some other legal form.
Some businesses receive penalties for late payroll tax deposits. To avoid such problems, don’t sign payroll checks unless the first check in the stack is the payroll deposit to your bank. This may have you paying deposits earlier than required, but you will not be receiving penalties.