Important Tips For Small Businesses

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December 14, 2011

Conceiving, starting and operating a small business can be a wonderful (and lucrative) adventure. ‘Being your own boss’ is the dream of many people, as is financial independence. Once established, they require a great deal of hard work and effort, but more importantly as much care and expertise as one would find in a major corporation. It is easy for the small business owner, once he has begun to taste success to want even more. How can I build this business even bigger? As with any business situation large or small the issues are really the same if you want to continue to SUCCEED. It not a matter of what you have done in the past, but rather what will I be able to achieve in the future.

1. Know your Product, your Customer and your Market

As always it is important not only to know what you are selling, but to whom! Do your customers live in the neighborhood or are your sales made internationally or even via the Internet. Who are your competitors? What are the particular strengths of your product or service that differentiates it from all the rest?

Probably the single most important question is related to an area that very few companies ever understand - what part of your business activity makes ‘money’. Not simply contribution but what is the real engine of your enterprise. There are a host of nice business activities to be involved in, but do you understand the ingredients or the parts that make money. If you do not, then we suggest that before you expand you should enunciate clearly what these are.

2. Watch the Paper Work

All businesses can fail if the owners or the operators forget about details. For the small business owner filing a tax return, getting a provincial/state sales tax number, remitting source deductions for employees and following environmental regulations are just a few. You might know the products and the customers, but very little about the back office. Remember as a small business owner you are not alone. Even the largest suffer from poor functioning systems and overly expensive CRM, information management and overly complicated computer programs and solutions.

3. Be Lean and Mean - Control costs

Overspending can kill a business, not only in the initial start-up phase, but for poorly managed acquisitions. If you want to grow - what is cheaper? Grow from within or buying someone else. For what you plan to spend, are you getting value? The measure of successful acquisitions is not high. If one carefully examines the purchases of competitive groups over the past 25 years, the rate of success for these transactions is well less than 25%. Why? A host of reasons, but most relate to failure of the staff integration; overpayment for the assets; even though due diligence was undertaken, surprises on closing exceeded expectations.

A classic of acquisitions fever was NORTEL, who completely mistook what was happening in the marketplace and thought what they were buying with company stock would make them a winner. They completely misread their customers future wants – sold the acquisitions for a fraction of their original price and went bankrupt. A larger enterprise can often weather such mistakes - a small business owner may not have the same sympathy from their banker.

4. Delegate Wisely

Small business owners most often start out doing everything and then gradually start sharing some responsibility with a close friend, relative or a professional service provider. Learning how to delegate and how to relinquish specific authority and decision-making authority to employees is equally hard for a corporate person or the small business owner. It has to take place if you want to grow. As a small business owner make certain that as you grow, the skills of the people inside increases as well as the professional advisors that you rely upon. The lawyer who does your will and handled the house mortgage may not be the best for a foreign line of credit. Is the accountant experienced enough? Have you an Advisory group that you can talk with?

5.Watch your Financing

Good advice for any business entity-large or small. A large number of small business entities fail because of under-capitalization. There is simply not enough money invested to make the business go. Financing has to be a priority in any business operation. Capital (investment and loans) should be sought when needed, always bearing in mind the company’s ability to repay borrowed amounts.

6. Grow, but Not too Fast

Why are you growing? What are the critical reasons to undertake an expansion? What impact will this have upon your core operations? What are the real risks? If a company intends to grow, it generally needs an infrastructure, procedures, controls, competent staff, good leadership and financing in place. It also helps to have a great product or service involved.

In any growth process, how will you cope with the lack of attention directed on the existing business as you focus on the new progeny?
If you do decide to grow, what form should this growth take? Internal or an acquisition!

7. Plan for your Retirement

Nothing last forever- the same can be said about a business and the owner. Plan for your retirement – this does not mean you will be giving up. You should never wait until it is too late to do something about the future. When you think you are ready to quit might not be a good time to sell your business. What will you need to support your lifestyle? Who might be interested in your business – keep a list. What about a sale to the employees – can they afford to take you out or will they need help. How might you go about to make all this happen 

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