Being an entrepreneur is not easy. From spending sleepless nights handling different clients with different needs to spending a substantial amount of money making sure the business runs smoothly, one can easily lose motivation. On your entrepreneurship journey, there are a few things you should improve so your business can grow.
This article touches on 4 things you need to know and improve on in order to have a better chance at a successful business.
Before you start your business, you need to visualize what the long-term goal is. Why are you selling baked goods today? Is it so that you can own your own bakery tomorrow? Why are you fixing phones today? Is it so that you can become the largest phone shop in the country tomorrow? Why are you in consulting? Is it to save up money so you can follow your passion and be a farmer? Strategy is thinking long-term and envisioning where it is you want yourself or your business to be. Strategy is planning and if done right, your business succeeds.
There is another element to strategy you need to be familiar with and that is tactic. If ‘strategy’ is the top of the ladder, ‘tactics’ are the rungs of the ladder that gets you to the top. Your everyday objectives help you achieve your tactics, which ultimately help you achieve your long-term strategic plans.
When it comes to strategy, you need to understand two things: Vision, and Mission.
Your vision statement shows you the ideal state that your business would eventually like to achieve. Look at Kellog’s vision statement here. Short, sweet, and shows the preferred ideal state of the company.
The mission statement is a succinct explanation of the organization’s reason for existence. It explains the company’s purpose and intention. Kellog’s Purpose is: “Creating better days and a place at the table for everyone through our trusted food brands”.
When you start out your business, jotting down your business’s vision and mission statements helps to hold you accountable and gives you a path to follow. As your business grows and as you decide on the direction you want it to take, the statements can change as well to adapt to the situation at hand.
You have now figured out your mission and your vision. The next question to ask yourself is, “How well can you take advantage of the market to get you to where you want”? The ‘market’ includes your customers and your competitors, among other things. Who are your customers? What do they want? How best can you deliver what they want? Who are your competitors? How can you do better than them? What are they doing wrong? And in some instances, how can you work with them?
Market research differs from industry to industry. Selling candy will require you to understand the flavors and ingredients of the candy you are selling, for example. You would also have to research where to strategically place yourself to capture a high amount of traffic so that your revenue increases. Selling financial products would require you to research the regulations of the country, the wealth levels of the country’s residents, the other financial services companies, the products you will be selling, and many other things.
Deep research would require you to use tools such as the SWOT analysis to ensure you know the Strengths, Weaknesses, Opportunities, and Threats that your business faces. The internet is your friend and can help you provide information regarding your market.
The government of countries at times pass bills to help the local residents by restricting certain imports. To give an example, on the 24th of August 2020, there was a bill passed in Botswana that restricted the importation of baked goods. This gives the opportunity to local bakers and bakeries to offer their baked goods to big supermarkets who usually import their baked goods.
Knowing the laws affecting your industry can either give you an advantage or disadvantage. Know them, and take advantage of them, if any.
Market research helps you determine the type of customers you want. Do you want to capture a niche market made up of only CEOs? Or do you want to capture the infant market by selling baby products? Do you want to offer consulting services to small companies or big companies? Will your goods or services be for everyone – individuals and businesses? Remember, your customers determine your income. Do your research as to which customer base would make your business more profitable.
To make good profits, you need to hire the right people. Who you employ or decide to outsource work to, will determine how successful your business is. As a business, you can either do things by yourself or outsource them. Growing your own wheat to make flour for your bakery can be costly and time-consuming. It is easier to buy already made flour. As a small business, doing your own taxes is something you can learn. If it will be too time-consuming for you, you can employ an accountant or outsource all your accounting and secretarial needs to another company. Doing things internally or outsourcing them can both save you costs in the long run. The competence of the hired human capital needs to be of quality for your business to succeed. If you or your employees are incompetent or the third party you hired makes unnecessary mistakes, it could spell doom for your company.
Remember that in as much as you hire quality, you must strive to be quality as well. Read more, learn more, and do more. The more you know, the more you can improve and better your business, either through cost-cutting or through innovation.
For example, if you run a small tutor business, you could take a short accounting course where you learn about bookkeeping and taxation and be the company’s accountant. Being your own’s company’s accountant reduces the fees paid to a third-party accountant. As your business grows and becomes more profitable, you can then hire an accountant so you can focus more on the strategic part of the business.
Taking the cheap option might later become expensive. Hire quality and focus on your personal development.
If you are an employer, you need to treat your employees well. Happy employees (mentally, physically, financially), means a more profitable business. For example, if you underpay your staff or don’t give them days off, they will get disgruntled mentally and financially and this will negatively affect your business. If you treat them well, they pass that happiness on to current clients and prospective clients and this increases your bottom line.
Treat your stakeholders well and the reward will be a more profitable business.
Accounting and Finance
Keeping records of a small business is no different than keeping personal financial records. Knowing the cashflows of your business(es) helps you take advantage of opportunities and is a good indicator of how profitable or cash-rich your business is at specific points in time.
When you know your company’s cash or profit position, you can make different decisions regarding its profits. In simple terms, your profit is your sales minus your cost of goods sold minus your expenses. So if you sell your baked goods and you make sales of USD5000 for that month, you deduct the costs you incurred in purchasing the raw materials for the cake. These include flour, water, eggs, icing, etc. These are your costs of goods sold and they include only the costs incurred in manufacturing the sold goods. Afterward, you deduct general expenses, like your electricity, transport, water, and rent. These are the general expenses incurred in running the business. The remainder is your profit before interest and tax. If you have debt interest and tax, you deduct them and get your profit after tax.
Here is a simple income statement:
The profit after tax is your net profit. Here are some things you can do with the profit:
- Save for any emergencies your business might encounter. Just like your personal finances, saving for emergencies is important in case your business faces an unexpected and dire situation.
- Invest so that you can take advantage of opportunities.
- You can invest the net profit back into your business, by buying new machinery or expanding it;
- Start a new business;
- Invest in the financial markets.
For example, you can use $500 out of the $1400 to open a stall and sell some food to university students. You can hire someone to run it while you focus on the bakery. That way, you have diversified your income streams. When the bakery doesn’t have a lot of customers, the food stall can keep you going.
Debt can help your business grow. If you want to start or expand your business and don’t have enough capital, you can approach a bank or a credit institution for a loan. Remember to keep track of your debt ratio. This is the ratio of your debt to your company’s assets. You don’t want to have a lot of debt when compared to your assets as this can lead to financial troubles. You can use the loan to buy equipment to start up or expand your business. When done right, the loan can magnify your profits and you can use the profits to pay back the loan.
Debt attracts interest. Interest is how a bank makes money from you. Paying more than the required interest charge helps you finish the debt faster. This is why keeping track of your cashflows is important. It makes you aware of if you can handle your debt repayments.
Keeping track of your numbers also helps you when it comes to paying your taxes. This helps you from getting in trouble with regulators. Tax experts can help you structure your business in such a way that you can reduce your tax bill.
Grow your business
Your business is a bridge to financial success. Entrepreneurship can be hard but when equipped with the right knowledge, it can become bearable and fun. Seeking help from financial advisors or networking with other entrepreneurs can assist you in growing your business.