Seven strategies to business success 

1.   Plan properly before start   up.

2.   Monitor your business     financial position.

3.   Understand the relationship between price, volume, and cost.

4.   Manage your business cash flows

5.   Manage your business growth.

6.   Utilize debt leveraging wisely.

7.   Plan for your transition.

Plan properly before start up.

Sounds easy enough but too many small business owners begin their operations without a road map and a concise business plan. Consider that of the more than 23 million businesses operating in today’s economy, approximately 80% fail within the first ten years. What is the underlying cause and effect: insufficient planning? You can be part of the 20% that does succeed.

First, begin by preparing a business plan that includes specifics such as the following:

      a mission statement - who are we and what are our products or services;

      start-up summary of costs i.e. equipment, rent, operating expenses;

       product development;

       product costing;

      identify your competition; know their market share, geographic location(s), and their product strength and weakness. Determine if you will compete in price or quality of service or product.

      revenue forecasting;

      what type of business tax entity structure is best for your specific industry and personal requirements;

      capitalization of the business;

      debt leveraging;

      employee staff size;

      advertising and marketing, including the use of the internet;

      prepare break-even analysis

       project future profit and loss

       project future cash flow needs 

The specific items listed above are certainly not all-inclusive, but should give the reader an over-all feel of the beginning process to prepare a business plan. The Small Business Administration’s web site (www.sba.gov) contains an excellent source of information on how to prepare a business plan. Other useful sources of information can be accessed at your local chamber of commerce and industry trade associations to name a few.

Monitor your business financial position.

Financial position refers to your company’s assets, liabilities and equity, usually determined at the end of a given month or at the end of the fiscal year-end. From an economic stance, financial position refers to the economic condition of your company in comparison to past performance and to other companies of similar size. You should also understand the basics business model affecting financial position. This model includes (1) the financial operating cycle; (2) the working capital cycle; (3) measurement of financial performance; (4) identification of the causes of financial problems. Utilize analytical ratios to spot problems and trends and determine your course of action.

Understand the relationship between price, volume, and cost.

Know your costs in order to set your prices to realize an adequate gross margin. Understand the relationship between cost-volume-profit. Know how to calculate break-even, which by definition, is the exact sales volume at which the business neither makes a profit nor incurs a loss.

Manage your business cash flows.

Your goal is to predict the cash flows and make plans in advance for required funds. Knowing in advance, what the projected cash flows are will go a long way in sustaining the business’ operations. Project your cash flows and cash requirements twelve months or more in advance and take a proper course of action to obtain short or long-term borrowing, as the case may be.

Manage your business growth.

Manage your company’s balance sheet to manage growth. For instance, permanent, long-term growth imposes requirements on the company. As sales increase, many types of assets i.e. inventory and accounts receivable increase proportionally. The balance sheet indicates the cost of growth in terms of decreased solvency, liquidity, and increased risk to the company.

Project the funds needed for sales growth and examine alternative sources for funds to manage growth. Maintain your company’s working capital by obtaining fixed long-term debt.

Utilize debt leveraging wisely.

Know and understand profit planning and cash budgeting to let you know how much cash you will need to support your sales over the short-term. Use short-term financing for current assets; long-term debt for permanent current assets and fixed assets.

Plan for your transition.

Take appropriate action today to ensure you have provided for the smooth and effective transition of the business in the event of disability or death. Your planning team may include:

§         attorney

§         CPA

§         Banker/trust officer

§         Life insurance underwriter