James Shores loves small businesses like jolly Ol' Saint Nick loves Christmas, and he's brought some proverbial presents (sorry, no refunds).
Hi! I’m James! Welcome to this Whiteboard Wednesday, and I would 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, so let’s talk about a few points that maybe you can approach with your business, in 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 forty five days for full payment. But on the supplier end, your vendor, may require 30 days, by that time you have to pay them in full. So that means that you may have fifteen days where you’re having to float those costs. And maybe that works for you, but that might be something 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 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. Your revenue, which you can’t tweak as much directly, but very much can be played a part of 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 know 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.
And 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 your 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 that you can know what you’re trying to accomplish with your business.
And so, some of the ways that we try to help customers understand how that works is to assess their costs. How much are your material costs? Your landed costs? What are your expenses? What are you putting your money into? The things that have to be accounted for, whether its for rent, for lighting, things like that.
What about your labors costs? Not only what you pay your employees, but the costs of them creating something, or manufacturing something, shipping something out, those all add to the cost of the product.
What are your processes? How long does it take for all 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 and 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, track your numbers. This comes down to information, 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, that’s why we continue to make these kind 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.