Hi, I’m James. Welcome to this Whiteboard Wednesday, and I’d just like to take a moment to say how much I love my wife. Today we’re going to talk about building the small business.
We love small businesses here at Fishbowl. We like to help them thrive and compete against the big guys, and so let’s talk about a few points that maybe you can approach with your business and your operations.
So the first one, “Evaluate your terms.” So, what does this mean? Let’s use an example. Let’s say that with your customers, you (as your company) require 45 days for full payment, but on the supplier end your vendor may require 30 days by the time you’d have to pay them in full. So that means that you may have 15 days where you’re having to float those costs, and maybe that works for you, but that may be something that you want to consider. So you could look at the terms you’ve given your customers – maybe that’s something you need to evaluate – or a lot of suppliers, if you get on good terms with them, may offer discounts if you pay in full early, which is another way you can possibly save money, if you have that ability to do so.
So the second one, “Manage your capital funds.” So again, this comes down to how do you use your money? We have here a few examples of different dials that you can tweak a little bit. The amount that you spend. The count of inventory you have on hand, which is a representation of where your cash flow can be tied up in. Your revenue, which you can’t tweak as much directly, but very much can play a part in these other components. And also forecasting. What’s coming up down the road? What are some possible demands from customers? Or even from additional costs suppliers might be passing down to you because of supply and demand.
Now with all of these you need to look at, I think most of all, where you’re spending. Where are you putting your money? Do you where it is? Do you know what kind of return you’re getting from that? If you don’t, that’s something that you need to evaluate immediately because if you don’t know, it’s very likely that it’s money that’s being lost or just thrown away entirely.
Now the third point, which is really the main point, is “Have a budget.” Now, we’re not here to tell you how you need to form a budget. Ideally, you should probably talk to some kind of financial consultant, or at the very least an accountant, if you don’t have one of those for your company so that you know what your strategy is. Whether that’s quarterly strategy, even an annual strategy, so you can know what you’re trying to accomplish with your business.
And so, some of the ways we try to help customers understand how that works is to assess their costs. How much are your material costs? What are your expenses? What are you putting your money into? The things that have to be accounted for, whether it’s for rent, for lighting, things like that. What about your labor costs – not only what you pay your employees, but the cost of them creating something, or manufacturing something, shipping something out? Those all add to the cost of the product. What about your process, how long does it take for all of these things to happen on your end? What about data entry? How much time do you spend on double or triple data entry? All of this, again, adds up.
So how can we work on this? Well, we can evaluate what our return on investment is for everything and every product, material, whatever we’re using in our business. What are we getting out of that money that we’re spending?
Automate – this is obviously a big one. This is how the big boys play, is they know their processes. A lot of things they don’t even have to go and track themselves, it’s automatically done, it’s tracked, it’s shipped. Whatever it is, it’s automated.
And finally, tracking your numbers. This comes down to information, to data. Where is your money being spent? It’s all of these points right here. If you can’t answer that, if you don’t know where your money is and where it’s going and what it’s doing for you, it’s time to step back and truly evaluate what are you trying to accomplish with your business?
Here at Fishbowl we love to help small companies, and that’s why we continue to make these kinds of videos and hope that you can enjoy them and make use of them. Feel free to check them out all over the Whiteboard Wednesday page.
That’s going to be this week’s Whiteboard Wednesday. And once again, I’m James, and I just love my wife so much.