Part 1 of 3
Before you open. While you operate. Your exit plan.
(Planning – Performance – Parachute)
There are several all-too-common situations we see with prospective new clients (small business owners) when they call or visit us. Most are avoidable or at least could be less traumatic with some “Planning”. Often times the entrepreneurial clock is ticking and we open businesses based upon industry experience or other factors and sometimes we didn’t do the due diligence or planning needed up front. Here are two very common things we encounter with our clients:
1) They wish to find out why they are not passing through the amount of net profit compared to what they thought they would when they opened their business “years ago”. The question isn’t really stated as such; this is typically what we hear – “I don’t understand where all of the money is going. It seems there’s not enough money left over to deal with downturns in business, equipment, hiring needs or even the next crisis that seems to come along!”
2) They wonder what happened to the “dream” of entrepreneurship when they seem to have almost no time left over to enjoy family or to relax. This it usually what we hear – “I opened 3 years ago and have always worked hard but, there never seems to be a break. I may have an employee who can’t make it to work or another goes on vacation and then something else happens and there I am, like always, working 70-80 hours weekly earning about the same as I did before. Again, I don’t mind working hard and I thought I knew what I was signing up for when I opened. Yeah, I like being my own boss but it’s not exactly what I thought it would be after a few years”.
Can you relate? Have you been there before? Are you there now?
Not unlike any good doctor; our ability to help our “patient”, the small business owner, is only limited by the quality, quantity and frequency of information we receive from the client. If you visit your doctor and do not allow them to run tests or have an in-depth, open and candid conversation, how would you expect your doctor to really help you otherwise?
Just so we’re on the same page, let’s first look at what is generally accepted or defined as “small business”. According to the SBA (Small Business Administration) there are approximately 28 million small businesses making up 99.7% of all U.S. firms. The SBA sets size standards according to industry. SO, your small business could be defined as “small” with up to 250 or 1500 employees maximum as per industry OR $750,000 to $38.5M in annual receipts. The point is that when we refer to small business these numbers look huge to a solopreneur or truly small company of maybe 3-20 employees or $300,000 to $5M in annual receipts. It is no surprise that U.S. small businesses also account for most of new jobs created as well as expansion. Therefore, it is very important to understand when we refer to small business almost all of business is “small business”.
There are 3 key areas we review and they involve:
a) What you do before you open the doors (planning)
b) What you do while your doors are open (performance)
c) What do you want to do for an exit plan (parachute)
Let’s take a brief look at the first item…
As with medical, there are norms or benchmarks associated with your business in various areas such as human resources, financials, etc. We all know 98.6F is considered “normal” so how do you determine or plan for what is considered “normal” for your business within your particular industry? This requires a few things. How well does your best competitor do? What are the established / published benchmarks for your business type? What key market factors affect performance in all measurable ways? Before your doors swing open and the first sales ring that register there are many things to consider when putting together your Business Plan. Didn’t have one? Don’t have one? Don’t worry, if you have since become established we can help take into consideration many of the things that should have been looked at and create some guidelines for comparison to help your business implement a plan that covers all of the key areas needed to help get things on the right track and keep them there.
Next month we will spend some time talking about “Performance” as the second vital area of small business and the key things to be on the look out for. In the meantime, if you have any questions or are curious about what we can do for you; please contact Shabro directly (239) 437-3016. Thank you.