Over 50% of small businesses fail within the first 5 years. What makes successful businesses different? Both successful and failed business owners had passion, expertise and drive to make their business grow. The difference - - successful business owners made sure that they focused on the five things that were critical to their business success.
Critical Item 1: Make Sure Your Money is Right Both Professionally and Personally
As a part-time CFO, I have had many clients that did not have in place a formal accounting system. This is critical because if you do not have a handle on how you earn and spend money, you will never know where you can safely cut costs, raise prices or focus advertising. However you decide to track your finances, they must include the following:
- Separate banking accounts for business and personal expenses. Business expenses should never be mixed with personal expenses. Any investor would become highly concerned if this happened.
- Formal but not cumbersome business expense reimbursement process. This ensures that you the owner get reimbursed for what was put into the business but also keeps the transactions arms-length, which gives investors comfort that the owners are not using the business as their personal piggy bank.
- Ability to track financial information at a detailed enough level to perform analysis such as revenue earned by department, product or customer type.
- Continuously look for ways to cut costs without cutting performance or customer service (e.g. periodically look for less expensive providers for supplies).
- Manage cash flow by projecting future needs in a 6-12 month cycle so that you ensure that you are able to pay the bills that keep your doors open (e.g. rent and payroll) and spend money on important customer building expenses (e.g. marketing).
Critical Item 2: Continuously Improve Customer Service
Customer service is vital to retaining current clients and attracting new ones. In today’s “always on” world, you must have the ability to service customers across multiple platforms in person and online. Your customer service toolbox must include the following:
- Basic website with multiple contact options
- Regular customer communication which can be through emails and newsletters
- Easy ways for customers to find you and connect with you
- Beyond average customer service
Critical Item 3: Know Your Competition
In order to maintain competitive, you must keep an eye out for what your competition is doing right and wrong. You can learn from what they are doing right and incorporate it into your business. You can learn from what they are doing wrong and capitalize on it. You can also capitalize on what makes you different from the competition. By knowing your competition you can do the following:
- Keep abreast of industry changes and trends
- Determine the share of the market your business should have and set goals to achieve it
- What makes your business different from competitors – both positive and negative attributes. And different means “why your solution rather than the status quo”.
- Ways you can lessen the competition by capitalizing on what makes your business different
Critical Item 4: Be Able to Delegate Non-Essential Tasks
Because their business is their “baby”, many business owners do not feel anyone can do anything right unless they oversee it or do it themselves. This can be death to a business. As a business grows, you must be able to delegate everyday mundane tasks to others. Tasks that can have a major impact should not be delegated unless you have the appropriate person in place (e.g. trusted manager or hired consultant).
Once you have begun to delegate, you can spend more time on strategically growing the business and analyzing your business results.
Critical Item 5: Maintain Multiple Revenue Streams
Your business should not rely on just a few customers or one mode of revenue generation. If there is a change in the industry or a customer goes out of business, you could irreparably hurt your business.
If you do have a business with only a few major customers, then find new target customer segments that would be interested in your product or service. For example, Cisco, the technology company, has traditionally had only corporate clients but introduced a product for the consumer market, its home networking router product.
Incorporate these tips into your business and you will be well on your way to business success. To learn more about Loftis Consulting, click here to visit Loftis Consulting’s part time CFO services page.
