When running a small business, it’s important to stay on top of certain areas in order to maintain an accurate picture of your business’ health. This will give you the information you need to make wise business decisions and plan for future growth and expansion. Here are four areas of your business you should stay on top of.
Your business is only as good as your team, and in order to make the most of that team, you need to have a thorough understanding of its strengths and weaknesses. After all, every team member — yourself included — has unique talents and strengths that can benefit your business. But you will also uncover weak areas in individual employees or in the way the group performs. For instance, you may find in your analysis that the members of your team are highly successful in bringing in new business, but fail miserably at retaining those new customers. One method of analyzing your team is to create a swim lane diagram to identify overlaps or gaps in your team’s processes so you can make them more efficient.
In order to run your business well, you need to understand where your business is financially at all times. By staying on top of your accounting and reporting, you will ensure you have easy access to the numbers you need to make the right decisions. For instance, before you begin that new marketing campaign, you’ll first need to understand your current cash flow situation. There are many reports and ratios that are helpful, but here are three you need to stay on top of consistently.
1. Gross profit ratio. You can have robust sales, but if your profit margins aren’t where they should be, your company’s bottom line will suffer. To determine your gross profit ratio, use this formula: sales – (materials + labor + overhead) / sales.
2. Cash flow projections. This report allows you to determine whether or not you’ll have enough cash to cover your upcoming operating expenses, based on the cash you expect to receive.
3. Sales projections. In order to estimate how much revenue you can expect in the immediate future, make a list of the sales you have already closed, but not yet billed, plus the sales that look as if they will close.
If you don’t know who your ideal customer is, there is no way you can effectively market to them. You need to understand your customer demographics in order to understand how to grow your business. For instance, by analyzing your customer base, you will learn how large and diversified it is, what areas most of your business comes from, what areas you are wasting your advertising dollars in, which customers account for the most and least profitable sales, how you acquired them, and what it takes to keep them. In other words, when you have a firm grasp of who your best customers are, where to find them, and how to persuade them to buy from you, you can use that information to build your business. You can simplify this process — and make it more accurate — by using big data software like OpenText. With it, you can use information about your customers to predict future customer behavior, analyze new customer opportunities, and identify problems before they put your business at risk.
Consumers have choices when it comes to buying, and you need to do all you can to ensure they buy from you instead of your competition. In order to do that, you need a complete understanding of what your competitors do better than you and where you have the upper hand. One of the best ways to get this information is by performing a SWOT analysis on each of your major competitors. SWOT stands for Strengths, Weaknesses, Opportunities, and Threats, and it is a useful tool for reviewing strategy and plotting the business direction you should take in regards to your competitors. For example, analyze their strengths and weaknesses by putting yourself in their customer’s shoes and signing up for their emails or newsletter, or by following them on social media and paying attention to what they offer. You can also visit their store or website as a customer, make a purchase, and experience firsthand what their customers do. Make a list of each one’s strengths and weaknesses, and then compare them to your own business’.
Once you understand your competitor’s weaknesses, it’s time to look for the opportunities they provide. For example, if you realize that your competitor is overcharging for shipping, you can use that as an opportunity to play up the fact that your shipping is free or reasonable. Finally, use this process to identify any threats your competitors pose to your business. Do they offer lower prices? You may need to speak to your supplier about an additional discount. Are their salespeople more knowledgeable or friendly? A training session might be in order. Businessballs offers a free SWOT template (PDF) that you can formulate for any situation, including competitor analysis.
Don’t leave your business success to chance. By staying on top of your team, finances, customers, and competition, you’ll have ready access to the information you need when it’s time to pivot or make an important decision.