With many of our clients we have moved to a rolling forecast instead of the traditional budget model. Why? To be frank, we started with this method a few years ago because so many of our micro businesses just used the budget more as a forecast anyway. Many solo entrepreneurs and micro business owners make quick decisions and run their businesses a bit on the fly. The mention of a budget is a painful thought to some of them and one that they resist as unnecessary with all their heart. They did not use the budget in the traditional sense of controlling their spending each month but rather as a forecasting tool for looking at where they will be now that they already made a decision and spent the money.
While this method served our small clients, it has actually become critical with our larger small businesses. With the rapid changes in technology and the continual political and economic uncertainty, small businesses need to be able to adapt to changes in the business environment in a very short time. It is no longer a certainty that you will be able to turn to a bank or outside investment to shore up a temporary short-fall in cash, so having a better way to plan the future and having the agility to adapt is crucial to success.
The purpose of a Rolling Forecast is to be able to foresee risks and opportunities, adapt your strategy given those risks and opportunities, and assign resources in a continual planning mode. The model depends upon identifying the key drivers in your business. In other words, identify what might cause your plan to vary, how you will know it is deviating from your original plan, and what you need to measure to see the deviation. And the model also needs to incorporate a cash flow aspect in the rolling forecast, since cash flow will make or break your business. For some businesses, for example, the key drivers in your plan might be the dollar value of open sales orders as of a certain day of the month, the price of raw materials, the number of credit sales and the average accounts receivable days outstanding.
Once the drivers are identified, various forecast models can be built to predict expected, worse case, and best case scenarios. By using a rolling process, you are constantly looking at what your results were versus what you expected, and by using multiple predictive models you will have already planned ahead and assigned the resources to act quickly given your results.
Showing posts with label small business. Show all posts
Showing posts with label small business. Show all posts
Friday, December 21, 2012
Tuesday, August 9, 2011
Are you too busy or are you procrastinating?
Small business owners are usually extremely busy and often overwhelmed by the amount and variety of tasks they must accomplish in a given week. We often hear that there isn't enough time in a day/week to get everything done. We understand this feeling as we are small business owners too!
What we have noticed is that it is usually the unpleasant tasks that get pushed to the back and left undone. Beth and I share a calendars on Microsoft Outlook and we schedule all time we are working at clients there as well as any meetings we will be attending. What we don't always do is put tasks we are going to work on at the office on the calendar. Since we work from our virtual office (our homes), we do a great deal of work there. We have noticed that when we are not getting a job done that putting it on the calendar on a specific day, at a specific time pushes us enough to get the task completed.
We are great believers in calendars-ours are color coded and maintained rigorously. We schedule family events as soon as they come to our attention and as we are planning each month, we make sure we have set aside time for big projects which are upcoming.
If you find you aren't getting essential but unpleasant tasks (bookkeeping?!) done time after time, consider putting them on the calendar for a day and time you feel the strongest. We also have found that scheduling something fun right after the task you dislike also gives you incentive.
What techniques do you use to get all your work done?
What we have noticed is that it is usually the unpleasant tasks that get pushed to the back and left undone. Beth and I share a calendars on Microsoft Outlook and we schedule all time we are working at clients there as well as any meetings we will be attending. What we don't always do is put tasks we are going to work on at the office on the calendar. Since we work from our virtual office (our homes), we do a great deal of work there. We have noticed that when we are not getting a job done that putting it on the calendar on a specific day, at a specific time pushes us enough to get the task completed.
We are great believers in calendars-ours are color coded and maintained rigorously. We schedule family events as soon as they come to our attention and as we are planning each month, we make sure we have set aside time for big projects which are upcoming.
If you find you aren't getting essential but unpleasant tasks (bookkeeping?!) done time after time, consider putting them on the calendar for a day and time you feel the strongest. We also have found that scheduling something fun right after the task you dislike also gives you incentive.
What techniques do you use to get all your work done?
Wednesday, February 23, 2011
Helping Partners to Remain Friends
It has been an interesting few weeks as we have been working with a couple of clients who are severing partnerships and going their own way. Overwhelmingly we notice the problems that arise when you do not obtain legal help in setting up a partnership or a multi-member llc and you do not have the proper operating agreements in place.
These are the typical scenarios: Best friends decide to start a business to promote a shared dream. No thought is given to how the business will be managed if one of the partners develops health problems. A husband and wife form a business together, trusting each other completely. No thought is given to what would happen with the business in case the couple divorces. For too many businesses, the llc is formed by filing the Articles of Incorporation, but the set-up stops there. The operating agreement is the important next step after filing the Articles of Organization to form the LLC.
Businesses are started with excitement and good intentions. Part of the up-front set-up, however, needs to be a detailed operating agreement including the solutions for the worst-case scenarios. The following lists some of the topics to be covered in the business operating agreement:
1. Who are the members of the LLC (that's right, member is the correct terminology)?
2. What did each member contribute to the business?
3. What are the requirements for a new member to join the business and how will the price be determined?
4. What are the requirements if a member wishes to withdraw from the business?
5. What will happen if a member becomes mentally or physically disabled. For what lengths of time?
6. If a member withdraws, how will the buy out price be determined?
7. How will duties be separated and/or shared?
8. How will disputes be resolved?
9. How will profits, losses, and distributions be split among members?
10. What will happen in case of a divorce in a Marital Property State like Wisconsin? Do you have the proper documents and signatures in place so that you do not end up in business with your partner's ex-husband in case of a death or divorce?
These are just the building blocks of an operating agreement. They can be as detailed as you think helpful. As in all things related to business, planning up front saves you a tremendous amount of grief in the end. Agree on the solutions up front and you will save yourselves a lot of heart ache later.
I invite you to share your lessons learned if you went into business without an operating agreement and ended up with problems later on.
These are the typical scenarios: Best friends decide to start a business to promote a shared dream. No thought is given to how the business will be managed if one of the partners develops health problems. A husband and wife form a business together, trusting each other completely. No thought is given to what would happen with the business in case the couple divorces. For too many businesses, the llc is formed by filing the Articles of Incorporation, but the set-up stops there. The operating agreement is the important next step after filing the Articles of Organization to form the LLC.
Businesses are started with excitement and good intentions. Part of the up-front set-up, however, needs to be a detailed operating agreement including the solutions for the worst-case scenarios. The following lists some of the topics to be covered in the business operating agreement:
1. Who are the members of the LLC (that's right, member is the correct terminology)?
2. What did each member contribute to the business?
3. What are the requirements for a new member to join the business and how will the price be determined?
4. What are the requirements if a member wishes to withdraw from the business?
5. What will happen if a member becomes mentally or physically disabled. For what lengths of time?
6. If a member withdraws, how will the buy out price be determined?
7. How will duties be separated and/or shared?
8. How will disputes be resolved?
9. How will profits, losses, and distributions be split among members?
10. What will happen in case of a divorce in a Marital Property State like Wisconsin? Do you have the proper documents and signatures in place so that you do not end up in business with your partner's ex-husband in case of a death or divorce?
These are just the building blocks of an operating agreement. They can be as detailed as you think helpful. As in all things related to business, planning up front saves you a tremendous amount of grief in the end. Agree on the solutions up front and you will save yourselves a lot of heart ache later.
I invite you to share your lessons learned if you went into business without an operating agreement and ended up with problems later on.
Tuesday, November 23, 2010
Giving Thanks leads to Small Business Success
In this week of Thanksgiving, I want to take a few minutes to reflect on Giving Thanks in the context of running a small business. I recently acquired two new motivational posters to hang in my office along with my business Vision Statement. These are visual reminders about the reason that I am in the business I am. Both of the motivational posters have a line in them regarding being thankful.
In a customer focused business model, who are the people that you should be conscious about thanking?
Thank your customers. Thanking your customers not only shows your appreciation but makes you approachable so that you can build a relationship with your customers which will keep them coming back. This relationship also allows you to ask for feedback in order to keep your company focused on your customers’ needs.
Thank your vendors and subcontracted service providers. Let them know that you appreciate the role they play in providing the services and products which allows you to run a successful business. Cultivating strong vendor relationships creates a win/win situation and allows you to provide better service to your customers.
Thank your employees. Let your employees know that they are an integral part of your team. Allow them the opportunity to shine and contribute to your business success.
Thank your business acquaintances. Drop a note of thanks for providing a referral or for sending a good article which you were able to apply to your business. The best way to encourage the continuation of behavior that you appreciate is to genuinely provide some positive reinforcement. A thank you is just that.
Thank your partners. They are the ones in the daily grind with you and they are often the last ones thanked for their efforts.
Thank your family and friends. Every successful entrepreneur has people in their lives who patiently endure long hours and endless conversations about work and who pick up the slack in our personal lives. Be sure to thank them for the effort.
Thursday, September 30, 2010
10 Tips for Working a Room
Networking is an essential part of every Marketing Strategy. Learn how to do it well and make it a productive use of your time.
1. Plan ahead. Put not only the event on your calendar, but block off time the following day to follow up and connect with the people you met.
2. Prepare. Dress appropriately, wear your name tag (on the right side!), have your business cards ready, plan your introduction.
3. Brush up on your small talk. Know the main news topics and have a few anecdotes, interesting books or articles, something on your reading list in your head.
4. Put on your smile, practice a good handshake, and remember to be focused on one person at a time. People want to talk to people who are pleasant and have a welcoming attitude.
5. Position yourself. Notice the flow of traffic and position yourself in a place that allows you to see who is coming and going and to be seen by others. You are not having a romantic dinner, so do not allow yourself to disappear into the corners of the room.
6. Know your goal. It is never my goal to gather as many business cards as possible. Instead, I make a point of meeting 2-3 new people and having a meaningful conversation with them and then reconnecting with 2-3 people that I already know.
7. Be customer focused. Ask questions about them. Get a conversation going, not a one-way monologue. Try to identify their needs. Figure out how you can help them.
8. Don't monopolize their time. 10 minutes is plenty of time to have a discussion and move on politely.
9. Introduce people. Everyone is at a networking event for the same reason, so introducing people is another way of being helpful. Think of yourself as a host in this respect.
10. Follow up with your new contacts. Connect on social media, set up a lunch, follow through immediately on any promises that you made. Meeting someone new is the initial goal. It is the follow up that begins the process of building a meaningful relationship.
Anything you would add to this list?
1. Plan ahead. Put not only the event on your calendar, but block off time the following day to follow up and connect with the people you met.
2. Prepare. Dress appropriately, wear your name tag (on the right side!), have your business cards ready, plan your introduction.
3. Brush up on your small talk. Know the main news topics and have a few anecdotes, interesting books or articles, something on your reading list in your head.
4. Put on your smile, practice a good handshake, and remember to be focused on one person at a time. People want to talk to people who are pleasant and have a welcoming attitude.
5. Position yourself. Notice the flow of traffic and position yourself in a place that allows you to see who is coming and going and to be seen by others. You are not having a romantic dinner, so do not allow yourself to disappear into the corners of the room.
6. Know your goal. It is never my goal to gather as many business cards as possible. Instead, I make a point of meeting 2-3 new people and having a meaningful conversation with them and then reconnecting with 2-3 people that I already know.
7. Be customer focused. Ask questions about them. Get a conversation going, not a one-way monologue. Try to identify their needs. Figure out how you can help them.
8. Don't monopolize their time. 10 minutes is plenty of time to have a discussion and move on politely.
9. Introduce people. Everyone is at a networking event for the same reason, so introducing people is another way of being helpful. Think of yourself as a host in this respect.
10. Follow up with your new contacts. Connect on social media, set up a lunch, follow through immediately on any promises that you made. Meeting someone new is the initial goal. It is the follow up that begins the process of building a meaningful relationship.
Anything you would add to this list?
Monday, September 20, 2010
The CPA's are tweeting!
The Financial Accounting Standards Board and the Government Accounting Standards Board are tweeting! This is either a sign of the apocalypse or a sign that social media is here to stay so we should all get on board.
There are many people, usually those who are closer to retiring than to their college graduation, who feel social media is a fad or a waste of time. There is probably no group more conservative than a bunch of accountants and if they feel tweeting has value, the rest of the world needs to consider the idea as well! The signs certainly indicate that it is not a fad. It can be a waste of time if you don’t have a well defined plan or strategy.
Social media should be used to gain name recognition and brand awareness. It can also be a great way to increase interaction with existing customers as well as potential clients. For those of you who have been avoiding social media, there are many great articles and webinars to guide you.
Just Google Social Media and see what you get!
Wednesday, April 7, 2010
Recommended Reading for Entrepreneurs
As a change of pace, we are listing some of our favorite on-line magazines, blogs, and websites that contain useful content for small business owners. We also recommend the Wall Street Journal, your local newspaper, and a trade magazine for your industry so that you can stay on top of emerging trends.
1. Entrepreneur Magazine http://www.entrepreneur.com/
2. Entrepremeur for Women Magazine http://www.womenentrepreneur.com/
3. Inc. Magazine http://www.inc.com/
4. Business Week for Small Business Magazine www.businessweek.com/small-business
5. My Venture Pad Blog http://www.myventurepad.com/
6. The Customer Collective Blog http://www.thecustomercollective.com/
7. IRS for Small Business www.irs.gov/businesses/small/index.html
8. SBA http://www.sba.gov/
9. CPA Letter Daily cpa@smartbrief.com
10. The Business and Financial section of the New York Times http://www.nytimes.com/pages/business/index.html
Do you have any you would like to add and share?
1. Entrepreneur Magazine http://www.entrepreneur.com/
2. Entrepremeur for Women Magazine http://www.womenentrepreneur.com/
3. Inc. Magazine http://www.inc.com/
4. Business Week for Small Business Magazine www.businessweek.com/small-business
5. My Venture Pad Blog http://www.myventurepad.com/
6. The Customer Collective Blog http://www.thecustomercollective.com/
7. IRS for Small Business www.irs.gov/businesses/small/index.html
8. SBA http://www.sba.gov/
9. CPA Letter Daily cpa@smartbrief.com
10. The Business and Financial section of the New York Times http://www.nytimes.com/pages/business/index.html
Do you have any you would like to add and share?
Thursday, March 25, 2010
Social media for small businesses
Beth and I are in the process of updating our marketing plan including changes to our website and increasing our knowledge and abilities with social media. It is a sometimes frustrating and daunting task, but we feel it is important not only for our own business but also for us to be able to help our small business clients. We have been tweeting for a while, but with the encouragement of one of our clients who is a social media star, we have set up a Facebook Fan page. You can check us out at E&S Entrepreneur Advisors on Facebook http://bit.ly/9nYw6Q. We attended a great presentation on Twitter put on by Lisa Cruz of Red Shoes Pr so our tweeting skills should improve soon. If you are looking for a great primer on Twitter, check out Red Shoes blog at http://www.redshoespr.com/blog/
If any of you out there have any other best practices for social media, let us know!
If any of you out there have any other best practices for social media, let us know!
Thursday, March 11, 2010
Grow your business thoughtfully
Beth and I are finishing up a class we are teaching on business planning. The last topic of the course is growth or more specifically, planned growth. While the word growth may sound wonderful after the agony small businesses have suffered during this economic downturn, uncontrolled growth can bring disaster. There are three main problems uncontrolled growth can cause:
Cash flow is the most frequent problem that occurs if a small business does not plan and control its growth. More sales mean more cost of goods sold which means more purchasing which means more money to be paid out for purchases. How are you going to fund your growth? Can you arrange for extended terms from your suppliers now that you will be ordering larger quantities? Can you require a deposit from your new customers and use that money to fund your inventory costs? What is your relationship with your bank? Talk to your lender and see if the lending environment in your area will provide you with a line of credit to fund your growth.
The next issue growing businesses face is management. This usually occurs when another location is established. Make sure your existing operations are stable and well managed by someone else before you turn your attention to a new location. You will notice I said you. New locations should always be run by the owner or existing upper management. This will insure a continuation of the processes, procedures and philosophies that have made your business successful to date.
The final problem is maintaining quality. We have all witnessed what has happened with Toyota in the last month. It is debatable whether the company’s problems stem from poor management, greed or losing sight of what made them successful. Whatever the cause is, it is a lesson to be learned by all businesses. A company must stay focused on its core values and mission in order to succeed.
We all hope that growth is in the future for our own businesses and for our country. Just make sure your growth is planned.
Cash flow is the most frequent problem that occurs if a small business does not plan and control its growth. More sales mean more cost of goods sold which means more purchasing which means more money to be paid out for purchases. How are you going to fund your growth? Can you arrange for extended terms from your suppliers now that you will be ordering larger quantities? Can you require a deposit from your new customers and use that money to fund your inventory costs? What is your relationship with your bank? Talk to your lender and see if the lending environment in your area will provide you with a line of credit to fund your growth.
The next issue growing businesses face is management. This usually occurs when another location is established. Make sure your existing operations are stable and well managed by someone else before you turn your attention to a new location. You will notice I said you. New locations should always be run by the owner or existing upper management. This will insure a continuation of the processes, procedures and philosophies that have made your business successful to date.
The final problem is maintaining quality. We have all witnessed what has happened with Toyota in the last month. It is debatable whether the company’s problems stem from poor management, greed or losing sight of what made them successful. Whatever the cause is, it is a lesson to be learned by all businesses. A company must stay focused on its core values and mission in order to succeed.
We all hope that growth is in the future for our own businesses and for our country. Just make sure your growth is planned.
Wednesday, March 3, 2010
Are You Concerned About the Integrity of Your Financial Information?
Every once in awhile a situation arises which reminds me of the reasons why Susan and I were compelled to start E&S Entrepreneur Advisors, LLC. This week I encountered one of those situations: a situation that happens over and over through no fault of the service provider, but which greatly impacts the small business owner.
If you bring your information to your tax accountant in a reasonable time frame (not March 31!) and your tax accountant immediately suggests filing an extension, then that might be a flag to you that your books are not in good order. If your tax accountant is asking you a lot of questions and indicates that they will have to make quite a few adjustments, then that is another flag that your books are not in good order.
Tax accountants are extremely busy from the beginning of the year until tax time, especially the smaller CPA firms and Single-Person Tax Providers. They do not have the time to be straightening out your books. They file extensions and then put your information aside until they do have time later. And, depending on the tax accountant's demeanor, they may never tell you that you are accounting for things incorrectly. Remember, the tax preparer's main focus is on taxes.
In the meantime, many small business owners are frustrated and overwhelmed. They end up incurring late penalties on their other year-end government reports and operating 6 months into the following year, at a minimum, with poor financial information. They are not comfortable with the integrity of their financial data.
If you are in this situation, give us a call now to set up a Free Consultation. We will straighten out your accounting situation and put procedures in place for you so that you have the vital information at your fingertips each month in order to effectively manage your business and make timely business decisions.
If you bring your information to your tax accountant in a reasonable time frame (not March 31!) and your tax accountant immediately suggests filing an extension, then that might be a flag to you that your books are not in good order. If your tax accountant is asking you a lot of questions and indicates that they will have to make quite a few adjustments, then that is another flag that your books are not in good order.
Tax accountants are extremely busy from the beginning of the year until tax time, especially the smaller CPA firms and Single-Person Tax Providers. They do not have the time to be straightening out your books. They file extensions and then put your information aside until they do have time later. And, depending on the tax accountant's demeanor, they may never tell you that you are accounting for things incorrectly. Remember, the tax preparer's main focus is on taxes.
In the meantime, many small business owners are frustrated and overwhelmed. They end up incurring late penalties on their other year-end government reports and operating 6 months into the following year, at a minimum, with poor financial information. They are not comfortable with the integrity of their financial data.
If you are in this situation, give us a call now to set up a Free Consultation. We will straighten out your accounting situation and put procedures in place for you so that you have the vital information at your fingertips each month in order to effectively manage your business and make timely business decisions.
Tuesday, January 5, 2010
Tips for Effectively Managing Employees
Entrepreneurs often find themselves thrown into the new roles of Employer and Manager, often for the first time in their lives. Bogged down by the other pressing tasks involved in running a business, many entrepreneurs do not give the role of Manager the proper focus that it requires. The reality is that poor management can destroy your business. Today I offer you a mini crash course on what I believe are the most important tips for being a good manager.
When I graduated from college and entered corporate America I asked my brother for some advice and this was his response: “Treat everyone, from the lowest man on the totem pole to the CEO, with respect. You never know who is going to be your boss some day.” I took that advice to heart and found that it served me well in my early days in the plants and then later as I became a manager.
On a practical note, what does it mean to respect your employees? It means understanding that your employees are individuals and taking the time to get to know them on a personal level, letting them know that they are important as human beings. It means that you understand that your employees are people with a variety of learning styles. As a good manager, it is your job to learn how to identify those learning styles and adapt your message to meet those styles. It means that you understand that your employees are thinking people capable of adding great value to your organization if you allow them the freedom to do so. It means the simple things, like showing up and working side by side with them when there is a problem, speaking politely with your employees even if you have an issue to resolve, being willing to pitch in and do the very jobs that you are asking your employees to do when times get tough, and following the same rules that you ask them to follow. If you don’t want your employees to leave early, for example, then don’t leave early yourself. Showing respect to your employees is the fastest route to gaining your employees respect as their leader.
In addition to respecting your employees, clear and complete communication with your employees is a must. By this I mean face to face communication giving your employees a chance to ask for clarification, as well as consistent reiteration with written communication. Communication requires a two-way exchange of information. Murphy’s law states that “if anything can be misunderstood, it will be misunderstood.” Clearly communicating your mission, objectives, and how it affects your employees is an important step in motivating your employees.
Finally, my favorite book on management is a book by Roger E. Allen, Winnie-the-Pooh on Management, given to me by my mother when I was promoted to my first managerial job. Despite all of the management seminars that I have attended and management books that I have read, I still go back to this book for the basics:
“A good leader will always try to make the project that she wants worked on seem to be exciting…That is really part of motivating individuals. Everyone will try to do a better job when they feel that the project is exciting and significant. By being part of something that is important, individuals will feel that they are important—everyone likes to feel that way.”
“Encourage and praise those who are working with (you)…living up to the good opinion that someone we respect has of us is a strong reason to do a good job.”
“(A good leader) treats individuals as individuals…He gives credit to others…An effective leader’s goal is to make his people look good.”
“(Give your employee) an important task to do—many managers delegate only unimportant or minor tasks, which is unfair to those they manage…(Don’t) tell him how to do it… let him decide how to accomplish the task …giving subordinates a chance to learn and develop their own skills and abilities… A manager has to learn that when she delegates, those she delegates to may make mistakes…By making mistakes you learn how to do things right, and you are not afraid to try new things. Delegation…allows managers to multiply their efforts.”
After all, multiplying our efforts is the whole reason for hiring employees to begin with.
Please share your tips on being a good manager in your small business.
When I graduated from college and entered corporate America I asked my brother for some advice and this was his response: “Treat everyone, from the lowest man on the totem pole to the CEO, with respect. You never know who is going to be your boss some day.” I took that advice to heart and found that it served me well in my early days in the plants and then later as I became a manager.
On a practical note, what does it mean to respect your employees? It means understanding that your employees are individuals and taking the time to get to know them on a personal level, letting them know that they are important as human beings. It means that you understand that your employees are people with a variety of learning styles. As a good manager, it is your job to learn how to identify those learning styles and adapt your message to meet those styles. It means that you understand that your employees are thinking people capable of adding great value to your organization if you allow them the freedom to do so. It means the simple things, like showing up and working side by side with them when there is a problem, speaking politely with your employees even if you have an issue to resolve, being willing to pitch in and do the very jobs that you are asking your employees to do when times get tough, and following the same rules that you ask them to follow. If you don’t want your employees to leave early, for example, then don’t leave early yourself. Showing respect to your employees is the fastest route to gaining your employees respect as their leader.
In addition to respecting your employees, clear and complete communication with your employees is a must. By this I mean face to face communication giving your employees a chance to ask for clarification, as well as consistent reiteration with written communication. Communication requires a two-way exchange of information. Murphy’s law states that “if anything can be misunderstood, it will be misunderstood.” Clearly communicating your mission, objectives, and how it affects your employees is an important step in motivating your employees.
Finally, my favorite book on management is a book by Roger E. Allen, Winnie-the-Pooh on Management, given to me by my mother when I was promoted to my first managerial job. Despite all of the management seminars that I have attended and management books that I have read, I still go back to this book for the basics:
“A good leader will always try to make the project that she wants worked on seem to be exciting…That is really part of motivating individuals. Everyone will try to do a better job when they feel that the project is exciting and significant. By being part of something that is important, individuals will feel that they are important—everyone likes to feel that way.”
“Encourage and praise those who are working with (you)…living up to the good opinion that someone we respect has of us is a strong reason to do a good job.”
“(A good leader) treats individuals as individuals…He gives credit to others…An effective leader’s goal is to make his people look good.”
“(Give your employee) an important task to do—many managers delegate only unimportant or minor tasks, which is unfair to those they manage…(Don’t) tell him how to do it… let him decide how to accomplish the task …giving subordinates a chance to learn and develop their own skills and abilities… A manager has to learn that when she delegates, those she delegates to may make mistakes…By making mistakes you learn how to do things right, and you are not afraid to try new things. Delegation…allows managers to multiply their efforts.”
After all, multiplying our efforts is the whole reason for hiring employees to begin with.
Please share your tips on being a good manager in your small business.
Monday, December 14, 2009
How do make running a small business easier?
What does it take to run a successful small business? Many entrepreneurs are caught off guard by the amount of work and the variety of tasks they must perform when running a small business. It is easy to get overwhelmed by all the jobs both big and small. Is there any way to make the juggling of all these tasks easier?
Some jobs are easier to deal with than others simply because the owner likes the particular task. Others are easier to avoid because the task is distasteful. The fact of the matter is that each task is crucial to the success of a small business and cannot be avoided. So how can you get them all accomplished?
Set up procedures and processes for your business. Take the time to figure out how best to organize your office, your business, yourself. Write down all the jobs that must be done to keep your business running and determine when they must be done. Then determine who is best suited to complete each task. If you are a one woman shop then it would appear that you must do everything but consider whether it would be money well spent to outsource some of your tasks. Hiring a bookkeeper or enlisting a payroll service may free up your time for income producing tasks which will pay for the outside service and allow you to do what you love and what you are good at.
We recommend putting undesirable tasks right on your calendar. Figure out what time of day and what day of the week works best for you to get the dirty work done and schedule your least favorite tasks for this time. Then stick to the calendar. Get the job done and crossed off your to-do list. You won’t believe how good it feels. Use to-do lists, a calendar and an organization chart and you will find your business running more smoothly and your life feeling less hectic.
So any other good ideas out there to help a small business owner stay organized and on track? Let us know.
Some jobs are easier to deal with than others simply because the owner likes the particular task. Others are easier to avoid because the task is distasteful. The fact of the matter is that each task is crucial to the success of a small business and cannot be avoided. So how can you get them all accomplished?
Set up procedures and processes for your business. Take the time to figure out how best to organize your office, your business, yourself. Write down all the jobs that must be done to keep your business running and determine when they must be done. Then determine who is best suited to complete each task. If you are a one woman shop then it would appear that you must do everything but consider whether it would be money well spent to outsource some of your tasks. Hiring a bookkeeper or enlisting a payroll service may free up your time for income producing tasks which will pay for the outside service and allow you to do what you love and what you are good at.
We recommend putting undesirable tasks right on your calendar. Figure out what time of day and what day of the week works best for you to get the dirty work done and schedule your least favorite tasks for this time. Then stick to the calendar. Get the job done and crossed off your to-do list. You won’t believe how good it feels. Use to-do lists, a calendar and an organization chart and you will find your business running more smoothly and your life feeling less hectic.
So any other good ideas out there to help a small business owner stay organized and on track? Let us know.
Wednesday, December 2, 2009
Transitioning from Corporate Executive to Small Business Owner
Today Susan and I began to teach an Entrepreneurial class geared mainly to executives downsized with the current economy and looking to start their own businesses. In preparation, I was reflecting on some of the differences between managing in a corporation and managing a small business and some of my early struggles in making that transition. Many of the skills are transferrable, but need to be toned down to account for less time, money, and staff. They are often, however, the very skills that lead to success in the small business world.
1. Strategizing. Most executives have been heavily involved in strategy sessions. A common misperception with small business is that you do not need to spend as much time on it as with large corporations. Nothing could be further from the truth. The big difference is that the strategizing team will not be readily available. One of the first things a small business owner should do is identify a team of experts to help him strategize. These might be people hired as employees, they might be experts whose services are outsourced, or they might be a group assembled as an Advisory Board.
2. Budgeting. Many corporate executives have been involved in budgeting so they understand the process, but many have only been responsible for developing their department budget and have had sales forecasts and production schedules prepared for them by other departments. One of the major hurdles for adjusting to managing a small business is that the small business owner is responsible for the entire budget, not just one piece of it. Depending on the type of business, the budget can be more or less complex than the executive is used to, but since there are no other departments to shift funds between to make up differences, it requires just as much thought and foresight.
3. Accounting and Business Information. Large Corporations spend vast amounts of money on Integrated Business Information Systems. When starting a small business, the business owner needs to perform the job of a systems analyst, detailing exactly what information is required and desired to run the business and make informed decisions, and then performing a cost/benefit analysis in regards to potential solutions. There are many industry specific programs which can be customized for certain industries as well as the popular software programs on the market (QuickBooks, PeachTree, MYOB, etc). Each business owner needs to determine the balance between having the information needed to make well-informed decisions and the time and resources available to gather this information.
4. Defining Goals and Measuring Performance: Many small businesses simply begin with an idea and open their doors for business. The business owner that takes the time to define specific, measurable objectives for all areas of the business and then compares actual results to those objectives will be in a better position to quickly adapt to any variances or changes noticed. Awareness and quick adaptation are vital for small business success. Many corporate executive will be thrilled with the speed with which a decision can be implemented in a small business environment.
5. Managing Employees: Corporate executives are often well-trained in managing and motivating a workforce. Never is it more important than when you own your own business to apply those skills to hire the right employees, train them well, communicating your mission and objectives and encourage independent thought and innovation within that mission.
For those of you that have made the transition from corporate executive to small business owner, what is your experience?
1. Strategizing. Most executives have been heavily involved in strategy sessions. A common misperception with small business is that you do not need to spend as much time on it as with large corporations. Nothing could be further from the truth. The big difference is that the strategizing team will not be readily available. One of the first things a small business owner should do is identify a team of experts to help him strategize. These might be people hired as employees, they might be experts whose services are outsourced, or they might be a group assembled as an Advisory Board.
2. Budgeting. Many corporate executives have been involved in budgeting so they understand the process, but many have only been responsible for developing their department budget and have had sales forecasts and production schedules prepared for them by other departments. One of the major hurdles for adjusting to managing a small business is that the small business owner is responsible for the entire budget, not just one piece of it. Depending on the type of business, the budget can be more or less complex than the executive is used to, but since there are no other departments to shift funds between to make up differences, it requires just as much thought and foresight.
3. Accounting and Business Information. Large Corporations spend vast amounts of money on Integrated Business Information Systems. When starting a small business, the business owner needs to perform the job of a systems analyst, detailing exactly what information is required and desired to run the business and make informed decisions, and then performing a cost/benefit analysis in regards to potential solutions. There are many industry specific programs which can be customized for certain industries as well as the popular software programs on the market (QuickBooks, PeachTree, MYOB, etc). Each business owner needs to determine the balance between having the information needed to make well-informed decisions and the time and resources available to gather this information.
4. Defining Goals and Measuring Performance: Many small businesses simply begin with an idea and open their doors for business. The business owner that takes the time to define specific, measurable objectives for all areas of the business and then compares actual results to those objectives will be in a better position to quickly adapt to any variances or changes noticed. Awareness and quick adaptation are vital for small business success. Many corporate executive will be thrilled with the speed with which a decision can be implemented in a small business environment.
5. Managing Employees: Corporate executives are often well-trained in managing and motivating a workforce. Never is it more important than when you own your own business to apply those skills to hire the right employees, train them well, communicating your mission and objectives and encourage independent thought and innovation within that mission.
For those of you that have made the transition from corporate executive to small business owner, what is your experience?
Wednesday, November 18, 2009
What can good accounting do for your small business?
What is accounting really? Techniques or a language that allows you to keep track of the money coming in and going out of a business. Many people are uncomfortable with accounting because they are unfamiliar with the terminology. I can’t tell you how many times I tried to explain to friends struggling with an accounting class in college how assets could be debits, liabilities-credits while income was a credit and expenses were debits. They always thought assets and income should act the same way. I tried to get into the theory behind double entry accounting and how the balance sheet and income statement flow through each other, but some people just got bogged down with the terms.
The nice thing about the invention of accounting software programs is that the terminology has really become a non-issue. With QuickBooks or other programs, the user is filling out forms or writing checks and the program “writes” the entries for you so you don’t need to know whether you are debiting cash or crediting sales. Once you let your discomfort over the terminology go, you can focus on learning how to use the program. Modern software has nice features built in that require you to enter data such as customer names and addresses only once and then each time you invoice that customer, all that information is automatically entered into the form. Even better, once you’ve learned how to use your accounting software, you can really reap the benefits of good accounting by learning how to use the many reports the programs can generate.
The whole point to establishing a good accounting system is to provide you, the owner, with the information you need to run your business. The less time you spend on the bookkeeping portion of the accounting process, the more time you will have for the analysis portion. It is the analysis that will point out the questions your business is asking you. While modern accounting programs can’t answer the questions, but they can point you in the right direction and give you the information you need to find the answers.
A successful small business owner learns how to make the most from her accounting process by selecting the right program, learning how to use the software, learning how to read the financial statements and using all the great information to make the decisions needed to keep her business moving forward.
The nice thing about the invention of accounting software programs is that the terminology has really become a non-issue. With QuickBooks or other programs, the user is filling out forms or writing checks and the program “writes” the entries for you so you don’t need to know whether you are debiting cash or crediting sales. Once you let your discomfort over the terminology go, you can focus on learning how to use the program. Modern software has nice features built in that require you to enter data such as customer names and addresses only once and then each time you invoice that customer, all that information is automatically entered into the form. Even better, once you’ve learned how to use your accounting software, you can really reap the benefits of good accounting by learning how to use the many reports the programs can generate.
The whole point to establishing a good accounting system is to provide you, the owner, with the information you need to run your business. The less time you spend on the bookkeeping portion of the accounting process, the more time you will have for the analysis portion. It is the analysis that will point out the questions your business is asking you. While modern accounting programs can’t answer the questions, but they can point you in the right direction and give you the information you need to find the answers.
A successful small business owner learns how to make the most from her accounting process by selecting the right program, learning how to use the software, learning how to read the financial statements and using all the great information to make the decisions needed to keep her business moving forward.
Monday, November 9, 2009
Stay Sane While Running Your Small Business
What do you need to keep sane while running your small business? Organization, routines, structures, priorities, and most important, a guiding mission. The key to getting all the work done in an efficient and effective manner is to set up the structure, steps and routines to keep you and your employees on track.
The key to making the process work is to become aware of your own personality and style. Organization techniques that work for your neighbor may not work for you because you each approach work and life in a different way. Some people are visual and need lists and reminders visible to keep them on track.
Once you figure out the ideal organizational structure for you and your employees consider all the tasks you need to accomplish in your business. Write them all down, no matter how small or insignificant they may seem. A little intimidating, isn’t it? Now you need to prioritize the tasks and figure out a timeline for each one. Some things will need to be done daily, others once a month and so on. You need to have prioritized first so if you run out of time at the end of a day, you’ll sleep at night knowing the most important jobs were completed.
How can you get all these tasks done and still have time for a personal life? Delegate where you can. Entrepreneurs are often unable to let others take charge. You can’t do it all so train your people well and let them work. Job descriptions and procedure manuals can help you insure that the works is done the way you need it to be. Try to be open to other ideas and other ways to get a job done. Your employee may have a great idea so hear him out. Make sure everyone understands why they are performing a task in a certain way. People are much more likely to remember how to do a job and to do it well if they understand why it is important and what the ultimate goal.
Don’t underestimate the importance of having a mission statement for your business and using it as you establish a structure, routine and processes for yourself and your employees. Creating a solid organization structure with good procedures, effective routines, clear priorities and a well defined mission will keep your business running smoothly and make the work environment more fun for everybody.
The key to making the process work is to become aware of your own personality and style. Organization techniques that work for your neighbor may not work for you because you each approach work and life in a different way. Some people are visual and need lists and reminders visible to keep them on track.
Once you figure out the ideal organizational structure for you and your employees consider all the tasks you need to accomplish in your business. Write them all down, no matter how small or insignificant they may seem. A little intimidating, isn’t it? Now you need to prioritize the tasks and figure out a timeline for each one. Some things will need to be done daily, others once a month and so on. You need to have prioritized first so if you run out of time at the end of a day, you’ll sleep at night knowing the most important jobs were completed.
How can you get all these tasks done and still have time for a personal life? Delegate where you can. Entrepreneurs are often unable to let others take charge. You can’t do it all so train your people well and let them work. Job descriptions and procedure manuals can help you insure that the works is done the way you need it to be. Try to be open to other ideas and other ways to get a job done. Your employee may have a great idea so hear him out. Make sure everyone understands why they are performing a task in a certain way. People are much more likely to remember how to do a job and to do it well if they understand why it is important and what the ultimate goal.
Don’t underestimate the importance of having a mission statement for your business and using it as you establish a structure, routine and processes for yourself and your employees. Creating a solid organization structure with good procedures, effective routines, clear priorities and a well defined mission will keep your business running smoothly and make the work environment more fun for everybody.
Tuesday, October 27, 2009
Budgeting Part III: How to use your budget to manage your business
The question that I often receive from small businesses regarding creating a budget is “What’s the point?” Underlying that question is the real question, “How do I use a budget to help me manage my business?” So let’s attempt to address that question.
First of all, when we talk about creating a budget, we usually mean a Pro Forma Profit and Loss Statement. In essence, if everything goes as planned, this is what our profit (we will only think positively here) will look like. I recommend taking this one step further and also creating a Pro Forma Cash Budget, budgeting for when you actually expect to receive and spend your cash. This will allow you to anticipate when you are going to have an abundance of cash and when you are going to have some cash needs so that you can plan for them. For example, if you run a retail business you can expect to do most of your business in November and December so you will end the year with a large cash balance. Before you spend it all or hand out large bonuses, look at your Cash Budget for January through April to see how much you money you need to keep in cash to get through those tough sales months.
Once you have your budgets prepared and you have finished your first month in the new year, do a comparison between your actual amounts and your budgeted amounts. Most importantly, be sure that you can explain the variances. If your Cost of Goods Sold is higher than expected you might want to be sure that it is because your Sales are higher than expected as well. If your labor expense was higher than anticipated can it be explained by an unanticipated order or have you not been watching your overtime closely enough? If you are a restaurant and your food purchases have increased but your sales have not, you may need to make sure that someone is not stealing food from you.
For each of the explained variances you will also want to consider whether it is a one-time anomaly or if this is something that you expect to continue. If it is a one-time event and you have overspent your budget then you know that you will need to adjust your spending down in a different month. If it is an event that you expect to continue, then you will want to adjust your budget to take the change into account. The favorable adjustments are easy. It is the negative variances that require some decisions on the owner’s part. Just remember that you developed your budget based upon your company’s strategy, which means that you need to make sure that all adjustments to your budget are also in line with your strategy.
The point of a budget and a good financial management policy is that you have planned for what you expect to happen and you are now analyzing the data and reacting quickly to your business needs.
A strong grasp of your business finances is essential to running a successful business. As with all things financial, if you find that this is not one of your strengths, then don’t just push it aside and ignore it. Get the help that you need.
First of all, when we talk about creating a budget, we usually mean a Pro Forma Profit and Loss Statement. In essence, if everything goes as planned, this is what our profit (we will only think positively here) will look like. I recommend taking this one step further and also creating a Pro Forma Cash Budget, budgeting for when you actually expect to receive and spend your cash. This will allow you to anticipate when you are going to have an abundance of cash and when you are going to have some cash needs so that you can plan for them. For example, if you run a retail business you can expect to do most of your business in November and December so you will end the year with a large cash balance. Before you spend it all or hand out large bonuses, look at your Cash Budget for January through April to see how much you money you need to keep in cash to get through those tough sales months.
Once you have your budgets prepared and you have finished your first month in the new year, do a comparison between your actual amounts and your budgeted amounts. Most importantly, be sure that you can explain the variances. If your Cost of Goods Sold is higher than expected you might want to be sure that it is because your Sales are higher than expected as well. If your labor expense was higher than anticipated can it be explained by an unanticipated order or have you not been watching your overtime closely enough? If you are a restaurant and your food purchases have increased but your sales have not, you may need to make sure that someone is not stealing food from you.
For each of the explained variances you will also want to consider whether it is a one-time anomaly or if this is something that you expect to continue. If it is a one-time event and you have overspent your budget then you know that you will need to adjust your spending down in a different month. If it is an event that you expect to continue, then you will want to adjust your budget to take the change into account. The favorable adjustments are easy. It is the negative variances that require some decisions on the owner’s part. Just remember that you developed your budget based upon your company’s strategy, which means that you need to make sure that all adjustments to your budget are also in line with your strategy.
The point of a budget and a good financial management policy is that you have planned for what you expect to happen and you are now analyzing the data and reacting quickly to your business needs.
A strong grasp of your business finances is essential to running a successful business. As with all things financial, if you find that this is not one of your strengths, then don’t just push it aside and ignore it. Get the help that you need.
Wednesday, October 21, 2009
Focus Your Business With An Effective Budget: Part II
So how do you create a budget for your small business?
In these challenging times, it is more important than ever to put together a comprehensive budget for your business to use in the next year. We recommend creating both a budget for your Profit & Loss and a budget for your Cash Flow needs. For those of you who are new to the budgeting process, here are a few pointers:
Pull out your prior years’ income statements and look at your historical data. Which income streams have been most successful for you and have provided you with the highest margins and therefore the most money? Which products or services have not performed as well as expected? Consider whether they can be improved and if not, eliminate them.
Look for patterns in your income stream and expenditures. If your money coming in from sales doesn’t match with timing of your major expenses such as seasonal inventory purchases, real estate tax payments or insurance premiums, setting a budget can help you make sure you are saving enough money to pay for these items.
Think about using zero based budgeting. Don’t just take last year’s budget and add an arbitrary increase in sales and expenses. Do some research and consider what a reasonable sales figure will be. Figure out what your staffing needs will be based on this sales figure. Talk to your major suppliers and your utility providers and see what price increases may be in your future. Consider what items are necessities and which expenditures are really luxuries. Evaluate every item in your budget and consider whether it is in line with your strategy for your business. With the economy still recovering, you need to maintain a lean approach to both your budgeting and the actual managing of your business. There is a wealth of information available to help you with the creation of your budget if you do a little research.
A well planned budget process can take some of the stress and fear out of managing your cash flow throughout lean times and allow you to spend your money wisely and avoid running up credit card balances.
In these challenging times, it is more important than ever to put together a comprehensive budget for your business to use in the next year. We recommend creating both a budget for your Profit & Loss and a budget for your Cash Flow needs. For those of you who are new to the budgeting process, here are a few pointers:
Pull out your prior years’ income statements and look at your historical data. Which income streams have been most successful for you and have provided you with the highest margins and therefore the most money? Which products or services have not performed as well as expected? Consider whether they can be improved and if not, eliminate them.
Look for patterns in your income stream and expenditures. If your money coming in from sales doesn’t match with timing of your major expenses such as seasonal inventory purchases, real estate tax payments or insurance premiums, setting a budget can help you make sure you are saving enough money to pay for these items.
Think about using zero based budgeting. Don’t just take last year’s budget and add an arbitrary increase in sales and expenses. Do some research and consider what a reasonable sales figure will be. Figure out what your staffing needs will be based on this sales figure. Talk to your major suppliers and your utility providers and see what price increases may be in your future. Consider what items are necessities and which expenditures are really luxuries. Evaluate every item in your budget and consider whether it is in line with your strategy for your business. With the economy still recovering, you need to maintain a lean approach to both your budgeting and the actual managing of your business. There is a wealth of information available to help you with the creation of your budget if you do a little research.
A well planned budget process can take some of the stress and fear out of managing your cash flow throughout lean times and allow you to spend your money wisely and avoid running up credit card balances.
Monday, October 12, 2009
Focus Your Business With An Effective Budget
We often encounter resistance at this time of year as we begin to speak of budgets with our small business friends. The feeling is that budgeting is a time-consuming process with little benefit. What's the point. We disagree. This blog is the first of a three-part series to make our case for the need for small businesses to devote some time in the next two months to establishing a good budgeting process.
Before you can create a budget, you need to know your long term (the next 5 years) and short term (2010)goals and your strategy for reaching those goals. So pull out your old business plans and take a look. Have you been following your plan? If you have not been following it, why? With the changes in the economy, do you need to rethink the direction of your company or are you just taking a little business detour?
If you do not have a business plan, then now is the time to at least formalize your operating strategy. What is your business? What differentiates you from other businesses offering the same services in your industry? Who is your target market? Are you reaching them? Do they know that you exist? After you have given some thought to these questions, take out a piece of paper and draw 3 columns with the following headings: 5-year vision, 1 year strategy, and tactics.
Under the 5-year vision, write down specifically how you want your business to be defined. Where do you want to be in 5 years? For example, you might want to be known in your market as the cutting edge new idea generator. Be clear here to define on paper who your target market is for the cutting edge new idea generator. Who do you expect your customers to be? Do some research to find out who these people are; who they are currently buying from so that you know who your competitors are; why they are buying from them. What is happening in your industry as a whole? Do you need to be considering alternative products and services if you think that your current products are going to be obsolete in the future? Under the 5-year vision you might also want to consider internal operations as well: what skill positions do you think you will need? What work environment do you want to create?
Next analyze where your business is compared to that 5-year vision. How close are you to achieving those results? What do you need to do to get there? Under your 1-year strategy column, write down where you need to be by the end of 2010 in order to be on track for your 5-year vision. This may include some specifics as to the dollar amount of sales that you need to achieve or the staff that needs to be in place by year end, etc.
Under the Tactics heading, start writing specifics. This is where you place your need to develop your specific advertising and promotion plans, your foray into social media, your need to create a specific video for your website. You might have a tactic to develop job descriptions and procedure manuals for your staff. Be as specific as possible here as this is the content that you will use to create your budget.
Now that you have your vision and strategy in place, you are ready to create a budget that helps you to reach your goals as opposed to a budget that merely states how you have been spending your money over the past few years. Tune in next week for a discussion on how to use this information to create a good flexible working budget.
Before you can create a budget, you need to know your long term (the next 5 years) and short term (2010)goals and your strategy for reaching those goals. So pull out your old business plans and take a look. Have you been following your plan? If you have not been following it, why? With the changes in the economy, do you need to rethink the direction of your company or are you just taking a little business detour?
If you do not have a business plan, then now is the time to at least formalize your operating strategy. What is your business? What differentiates you from other businesses offering the same services in your industry? Who is your target market? Are you reaching them? Do they know that you exist? After you have given some thought to these questions, take out a piece of paper and draw 3 columns with the following headings: 5-year vision, 1 year strategy, and tactics.
Under the 5-year vision, write down specifically how you want your business to be defined. Where do you want to be in 5 years? For example, you might want to be known in your market as the cutting edge new idea generator. Be clear here to define on paper who your target market is for the cutting edge new idea generator. Who do you expect your customers to be? Do some research to find out who these people are; who they are currently buying from so that you know who your competitors are; why they are buying from them. What is happening in your industry as a whole? Do you need to be considering alternative products and services if you think that your current products are going to be obsolete in the future? Under the 5-year vision you might also want to consider internal operations as well: what skill positions do you think you will need? What work environment do you want to create?
Next analyze where your business is compared to that 5-year vision. How close are you to achieving those results? What do you need to do to get there? Under your 1-year strategy column, write down where you need to be by the end of 2010 in order to be on track for your 5-year vision. This may include some specifics as to the dollar amount of sales that you need to achieve or the staff that needs to be in place by year end, etc.
Under the Tactics heading, start writing specifics. This is where you place your need to develop your specific advertising and promotion plans, your foray into social media, your need to create a specific video for your website. You might have a tactic to develop job descriptions and procedure manuals for your staff. Be as specific as possible here as this is the content that you will use to create your budget.
Now that you have your vision and strategy in place, you are ready to create a budget that helps you to reach your goals as opposed to a budget that merely states how you have been spending your money over the past few years. Tune in next week for a discussion on how to use this information to create a good flexible working budget.
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