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Chris Hunter, MBA Principal What Every Successful Business Owner Should Know About His Business A client recently asked what essentials he must know or pay attention to in order to make his business more successful. What a great question! Upon careful reflection, here’s my best shot and it boils down to just four items:
The Business Development Plan – the Owner’s Roadmap to Success A Chinese proverb says that “If you don't change your direction you're likely to end up where you're headed.” A business development plan is just the ticket for helping a business owner know exactly where he is heading and how he is going to get there. Two characteristics underpin every great business development plan – simplicity and intentionality. No rocket science required. A client of mine recently launched his business development plan and he is seeking to accomplish just three goals – develop a fresh vision for the business, create a marketing plan and implement monthly cash flow monitoring by operating division. He is already seeing big improvements in his team’s morale, customer service, profitability and, ultimately, his business’ value. A business development plan should be tailored to your specific goals. Because it is often hard for a business owner to see the forest for the trees, don’t hesitate to contact a professional business development advisor for assistance. The Daily Cash Flow Break-Even Sales Point – The Starting Point of Profitability Responsible business owners need to know the average daily sales volume required to satisfy average daily cash expenses. This number is called the daily cash flow break-even sale point and knowing this number reduces cash flow worries – plain and simple. How do you calculate the daily break-even sales level? Begin by using your business’ financial statements to add up the required cash expenses for the last twelve months. The total will include your company’s cost of goods sold, employees’ gross payroll expenses, utilities, rents, leases, interest and principal costs, taxes and, of course, your salary or draw. This total then becomes the numerator of the equation. Divide the numerator by the number of days your business is open for business during the year. The resulting answer is your daily average break-even sales point . For many business owner, making this calculation is a real ‘eye-opener’. Expect to learn where your cash is going and to and each business day knowing for sure where you stand. We recommend break-even be recalculated on at least a quarterly basis – more frequently if your business is undergoing rapid change or growth. Lastly, we encourage business owners to share the result with trusted team members. Their understanding of the essential connection between sales and paychecks is not to be taken lightly and they will find it a healthy and stimulating challenge to “top” the daily break-even bar. The Ideal Customer Profile – Profit by Serving the Right Customers If you’ve been in business for a while you know that not all customers are of equal value. The questions are who are your best customers and why? How do you know your marketing and selling activities are yielding more customers like your best customers? These questions underlie your need to clearly define your ideal customer profile. The first step in defining your profile is to look for patterns among your most-profitable customers. (Please note that you favorite customers are not necessarily your most profitable customers and that you may need to spend time figuring out just who are your most profitable customers.) Although varying business to business, we suggest an ideal customer profile contain specific, observable attributes that have proven to produce both profitability and joy for you – the business owner. Here are some ideal customer profile characteristics Cornerstone considers important to the success of our business development practice:
Our profile has eleven criteria in all. We are happy to share the other criteria with you if you call. However, please only use our list as an example. It is important for you to define your own profile. Unless you are pursuing customers who fit your own ideal customer profile, you are likely growing a business filled with sub -profitable customers. Paying Attention to Team Tasks and Rewarding Excellence Paying attention to team tasks and rewarding excellence is more important to customer satisfaction, growth and profitability than just about anything else you could possibly do to improve your business. I don’t mean knowing whether your team shows up for work or not, or for that matter, is actually working at all. Rather, a business owner needs to know what specific tasks his team is doing and how those tasks relate to serving customers and generating profit. A starting point is asking how a specific task either serves customers or reduces expenses. Both are valuable. However, if you don’t see a connection, how could your employee? But don’t stop there! When you see employees excel, reward that excellence as though your team were your business’ most valuable asset – which of course they are. Ask yourself and your team whether a given task represents your very best possible return on the labor dollar. Finding the answer, continually refining tasks and rewarding excellence puts you well down the road to building a better a business! Chris Hunter, MBA, Principal of Cornerstone Business Solutions A leading business development advisory practice in the Four Corners and member of the BBB. |
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