Small businesses have traditionally been a strong economic engine, accounting for more than 50 percent of the capital investment made and for more than 90 percent of the jobs created.
While some business owners may need to be making investments in their company’s future rather than taking immediate profits, the actions must lead to ultimate profits to avoid loss of the investment. “Pay yourself first” may not always work, but if you are working for minimum wage or less, you are missing the concept of business and may be putting your future in jeopardy. Don’t let your business become a charity.
Here are some do’s, don’ts:
DO create a formal business plan to guide you toward the future you want. Remember the old adage, “If you fail to plan, you plan to fail.” Without a plan, you will react to current situations without seeing the big picture.
DO update the plan to reflect current conditions. Business, like life, is dynamic. Yesterday’s plan, based on yesterday’s assumptions and conditions, must be reviewed, updated and revised if you want to position your business for tomorrow.
DON’T assume that everything will go back to the way it was as the economy recovers. We hope that will be the case, but do you want to bet your future on it? Technology, consumer trends and outside factors continue to evolve and will affect the marketplace. Your business must adapt to the future.
DO ensure that investments you make in your business in terms of both money and time have an ultimate payback. A good accounting system can make the difference between failure, mediocrity and success. Make sure you know your costs and profits by product or service line.
DO seek input from and discuss potential changes with employees. In many cases, they will be able to contribute ideas on how to reduce costs by streamlining your processes.
WARNING SIGNS — Seek help for your business if:
- Volume is up but profits are down.
- You have multiple product or service lines but don’t know the profitability of each.
- Your customer base has eroded and you are waiting for it to return.
- Your competitors have announced new lines of business, but you are doing “the same old thing.”
- You are worried about costs and sales but have not sought input from key employees.
- Your business has not yet been affected by economic conditions and you think, “It won’t happen to me.”
- You do not have an updated business plan.
Philip Geist, PhD, is the area director for the Small Business Development Center, which provides free, confidential counseling to entrepreneurs and small business owners. Call 352-334-7230 or visit sbdc.unf.edu for more information. This material was condensed from Dr. Geist’s blog at sbdc.unf.edu.
Reducing salary and pay rates in exchange for a profit-sharing plan. While it means less income now, employees avoid layoffs and will benefit when the economic cycle turns up again. The business benefits because the employees have an interest in its success and will work to maximize its profits.
Switching to a three- or four-day workweek to avoid layoffs, while allowing employees to seek part-time work on a scheduled basis until sales levels increase again.