The main reason I have found why so many small businesses do not perform to their appropriate level is because the owner does not properly use his or her time; that is, they don't prioritize which of their efforts create their best results so that they know where to focus their time. Without knowing who your best customers or clients are or what the best use of your time is, you inevitably waste time on things that don't produce desired results.
Let me give you an example. Say you want to earn $200,000 per year and let’s say there are 1,000 productive hours. By the way, the number of productive hours i use in this example is very generous, because according to one study of Fortune 500 CEOs, the amount of productive time in a day was 45 minutes equating to 225 hours for the year. For this example, let’s say it is 1,000 productive hours for you. This means that each hour you work should be valued or billed at $200/hours. ($200,000/1,000 hours.)
My question to you is: Are you doing the type of work that pays you $200/hour?
If you engage in any type of administrative work it would probably be valued at $15-25 per hour.
Any bookkeeping related work would probably be valued at $20-30 per hour.
Answering the phone, dealing with customer queries, etc is probably valued at a similar hourly rate.
These are just a few examples of the
activities that many small business owners find themselves engaged in on a daily and weekly basis. As a small business owner, it is easy to become distracted by tasks that seem important and urgent, otherwise called ‘fires’. While these fires seem crucial at the time and certainly do need to be addressed, they are not the best and highest use of the business owner’s time.
You are probably asking yourself what type of work do you need to do to get paid $200/hour? Using the example above, this is the dollar figure that best represents your financial worth on an hourly basis.
To reach this dollar figure per hour, you would need to be engaged in “strategic” work. Some examples are:
- exploiting new markets
- developing new products/services
- creating new marketing avenues
- generating new leads or prospects
- improving on your ratio of leads to sales
- increasing your client retention
Every month, set aside at least twenty percent of your time to dedicate toward such activities. These activities should not only be scheduled within your calendar, but they need to be tackled first. If you leave these activities until the end of the week, it is unlikely that they will be completed. Things will pop up and before you know it, the end of the week will be staring you in the face and you will not have accomplished the most important tasks which have the potential to increase revenues and profit in your business.
10 Tips For Avoiding Financial Failure in Business
Your business may have made it through those imperative first three years, but what about the years ahead? Is your business strong enough to make it without the risk of financial failure?
If your new online business can make it through the first three years, the chances are pretty high that you will survive long term. The question becomes how do you properly avoid financial failure during those critical years, and beyond?
1. Get to know the most common reasons that businesses succumb to financial failure, so you can spot and fix problems before it is too late.
2. When just starting out, it is best to overestimate your start-up costs, than to underestimate. Thoroughly research all of the expenses and operational costs that you will run into, and determine financing options ahead of time.
3. Know the difference between profit and cash flow. Just because you make a sale and bring in some money does not mean you automatically have earned a profit.
4. Do not rely on loans or overload with debt. A healthy business will have a good balance of equity and debt. Work within the budget you have until your profits pick up, allowing for other expenses.
5. If you do take on debt, make sure you completely understand the expectations of your financiers. Do not enter into any agreement that you are not completely sure you can honor, because ruining the reputation of your company in the financial community could be the kiss of death to a growing online business.
6. If your online business has employees, even virtual ones, make sure they are well
managed so everyone is pulling their own weight and doing their job. Overpaying employees who contribute nothing or continually mess things up can lead to the downfall of the company.
7. Do not put a lot of money into new products or ideas until you have adequately researched your market to ensure there is a demand for it. The worst thing you can do is buy into something blind and find out thousands of dollars later that it isn’t going to sell.
8. Determine the SWOT (strengths, weakness, opportunities, threats) for your business. Aim to resolve any weaknesses and avoid threats now and those predicted to arise in the future.
9. Have detailed plans for success, instead of merely aiming not to fail. The more realistic you are with your outlook for the company and the more detailed your plans, the more likely you are to notice signs of financial troubles to come. Many businesses that fail do so without seeing signs that were obvious to others.
10. Perhaps the biggest key is to properly monitor expenditures and stock. Know on what every penny is being spent and verify that it is essential, cutting out as necessary. Ensure that every item you stock is worth the space it takes, and every item is accounted for. Now is not the time for loose monitoring or spending on luxuries. It’s time to ensure that your expenses are covered.
Owning your own business and making money online has huge potential for anyone who seriously weighs the risks and puts in the hard work to grow a successful online business. While the threat of financial failure is always there, there are also plenty ways to avoid it now and in the future.
If your new online business can make it through the first three years, the chances are pretty high that you will survive long term. The question becomes how do you properly avoid financial failure during those critical years, and beyond?
1. Get to know the most common reasons that businesses succumb to financial failure, so you can spot and fix problems before it is too late.
2. When just starting out, it is best to overestimate your start-up costs, than to underestimate. Thoroughly research all of the expenses and operational costs that you will run into, and determine financing options ahead of time.
3. Know the difference between profit and cash flow. Just because you make a sale and bring in some money does not mean you automatically have earned a profit.
4. Do not rely on loans or overload with debt. A healthy business will have a good balance of equity and debt. Work within the budget you have until your profits pick up, allowing for other expenses.
5. If you do take on debt, make sure you completely understand the expectations of your financiers. Do not enter into any agreement that you are not completely sure you can honor, because ruining the reputation of your company in the financial community could be the kiss of death to a growing online business.
6. If your online business has employees, even virtual ones, make sure they are well
managed so everyone is pulling their own weight and doing their job. Overpaying employees who contribute nothing or continually mess things up can lead to the downfall of the company.
7. Do not put a lot of money into new products or ideas until you have adequately researched your market to ensure there is a demand for it. The worst thing you can do is buy into something blind and find out thousands of dollars later that it isn’t going to sell.
8. Determine the SWOT (strengths, weakness, opportunities, threats) for your business. Aim to resolve any weaknesses and avoid threats now and those predicted to arise in the future.
9. Have detailed plans for success, instead of merely aiming not to fail. The more realistic you are with your outlook for the company and the more detailed your plans, the more likely you are to notice signs of financial troubles to come. Many businesses that fail do so without seeing signs that were obvious to others.
10. Perhaps the biggest key is to properly monitor expenditures and stock. Know on what every penny is being spent and verify that it is essential, cutting out as necessary. Ensure that every item you stock is worth the space it takes, and every item is accounted for. Now is not the time for loose monitoring or spending on luxuries. It’s time to ensure that your expenses are covered.
Owning your own business and making money online has huge potential for anyone who seriously weighs the risks and puts in the hard work to grow a successful online business. While the threat of financial failure is always there, there are also plenty ways to avoid it now and in the future.
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