The MyBusinessDashboard Blog: Small Business Dashboard Metrics Key Performance Indicators and Goals

5 Mistakes that Can Ruin your Business and Destroy your Dreams: #3 Ignore the Profit and Loss Statements

This is the second in a series titled, "How to Ruin Your Business and Destroy Your Dreams!"  I originally presented this to the Chandler Chamber of Commerce.  The PowerPoint is available at www.MyBusiness-Advisors.com.

Today's mistake: Ingore your Profit and Loss Statement and other financial reports

Can you imagine losing weight without ever stepping on the scale?  Trying to run a profitable business without looking at your financial reports is the same thing.  You must monitor your progress, or lack thereof.  Look at your reports at brutal facts, not judgements.  They tell you a story, paint you a picture, that you must see.  Jim Collins in his book 'Good to Great' makes this exact point.  In order to turn things around, you must face the brutal facts.  You can find those brutal facts in your financial statements.

Running a profitable small business can really be boilded down to three numbers: Revenue, Gross Profit, and Net Profit.  This becomes an exercise in Sales, reducing cost of goods and reducing expenses (including taxes).  Start working this like a business owner, and you will start to see the benefits.

Your Ideal Client Defines Your Business Philosophy

I was talking today with the owner of a promotions company.  His business promotes music acts, finding them venues and selling tickets to their shows.  I asked him if there were two or three criteria that he used to identify if an act would be a profitable one.  He had a quick answer: "I ask them if they're entertaining."

This question really puts his philosophy down in simple terms: he hires and promotes entertaining acts because he's in the entertainment business.  It boils down to knowing his market and whom an ideal client is.

Some of the answers he's gotten to that question also shed some light on running a profitable small business.  Some of the acts, he says, answer, "Well...I don't know!"  The musicians have concentrated so much on their musical skills, that they haven't considered their entertainment value.  There are very few musical acts that make it without this element to their show.

In this conversation, I see two lessons:

1. Have a simple, clear philosophy for your business: know with certainty who a good client is for you and how you can help them.

2. Know what business you're in.  Stay clear of the mistake some of these musicians make.  Look to the emotional benefit your customers have to better understand how you're helping them improve their lives.

These two lessons will help you develop your business philosophy.

DecLines of Credit: Banks are yanking our Dreams

I heard yet anther small business owner tell the story of a bank yanking her line of credit.  Too many times, I've heard small business owners who were depending on their lines of credit for cash flow during this hard time explain that they'd received a cold, heartless letter from their bank telling them that their line of credit was no longer available.  These are folks with good credit and good payment history, but now the money they were counting on is no longer there.  This can make running a successful small business even more difficult in difficult times.

So, what should you do if you have a line of credit and are planning to use it or really need it available just in case of a bad month?  You might consider taking the money out of the line of credit and putting it into a money market, CD, or savings account.  ASK YOUR FINANCIAL ADVISOR which, if any at all, is the best option for you.  Just remember, an open credit line is possible cash outflow for a bank, and they need money as much as any of us.  Don't leave them the chance to grab your money out from underneath you.

I always recommend getting to know your small business banker.  I'm not sure your local contact can do any good for you in this case, but having somebody on your side can't hurt.  So, keep up those efforts in building that relationship.

Setting Attainable Business Goals for the New Year, Part 1

With the economy sliding into a recession, planning for success has never been more important.  The Entrepreneur must avoid the trap of trying NOT to fail and get back into staying focused on success and growth!  The time has never been better for a small business owner to grab a larger share of the market and position the company for future growth.  In order to do that, the entrepreneur must set attainable goals for the New Year.  There are six simple steps to setting these goals and creating a plan of action to achieve them.  Here are the first two:

1. Define your success in achievable, measurable terms.  Start with the Big Picture.  What does ‘success’ mean to you and your company?  Imagine the moment when you have finally made your business a success.  Many entrepreneurs define their success in terms of sales ($1,000,000!), or marketing position (we’re Number 1), profits, number of locations, or even awards. 

2. Write your Big Picture Goal down in an inspirational sentence.  Take the Big Picture Goal you defined above, and write it down it a short, 1-sentence, inspirational sentence.  I recommend using the format, “I am going to…by…”  For example, “I am going to sell one million units by January 1^st of 2010!”  The key here is that this sentence, this goal, must be short, measurable, and inspirational.

“Believe you can and you're halfway there.” – Theodore Roosevelt