by Industrius CFO | Business Owners
There’s no magic formula to running a successful business. While an equation would be helpful, the most business owners can do is learn from fellow entrepreneurs. By looking at the common threads between successful small business owners, hopeful (and experienced) entrepreneurs can learn about what they should and shouldn’t do. First, let’s look at what causes many small businesses to fail: Incompetence: Despite their intentions, many business owners aren’t educated enough on the intricacies of business ownership. About 46% of businesses fail because of it. Lack of managerial experience: 30% of businesses fail due to a lack of managerial experience. When one lacks experience with leading employees, good credit practices, reviewing important data (such as financial ratios by industry) and the logistics surrounding borrowing money, businesses can very quickly run into trouble. Lack of product knowledge:11% of businesses fail because of a lack of experience in the goods or services they offer. This can lead to incorrect pricing and wasting money. Educating yourself on important logistics like financial ratios by industry, financial statement trend analysis, benchmarking analysis, business valuation software, and budgeting and planning software will lay the groundwork for your business’s success. Fortunately, it’s easy to learn what makes a business successful. While it may not be as simple to implement, knowledge is the first step: 1. Know What You Want: If your answer to that is simply “money,” you’re already setting yourself up for failure. While money is a necessity, it shouldn’t be the driving factor behind running a business. The most successful entrepreneurs started out hoping to solve a problem, do what they love, give back...
by Amanda King | Business Owners
Why Small Businesses Should be Using Big Data Big businesses aren’t the only ones who can make data-driven decisions using big data these days. Small businesses can reap the benefits, too. Analyzing all the online and offline information that you can helps to grow your business. Big data is defined as very large datasets that can be analyzed computationally to reveal patterns, trends, and associations – especially in connection with human behavior and interactions. A big data revolution has arrived with the growth of the Internet, wireless networks, smartphones, social media and other technology. Organizations who discuss using big data usually have the resources to hire research forms and data scientists to do the work for them. But, if you know where to look, small businesses can finally step up to the plate and utilize big data, themselves. 7 Benefits of Using Big Data 1. Using big data cuts your costs A recent Tech Cocktail article looks at how Twiddy & Company Realtors cut their costs by 15%. The company compared maintenance charges for contractors against the average of its other vendors. Through this process, the company identified and eliminated invoice-processing errors and automated service schedules. 2. Using big data increases your efficiency Using digital technology tools boosts your business’s efficiency. From using tools such as Google Maps, Google Earth, and social media, you can do many tasks right at your desk without having travel expenses. These tools save a great amount of time, too. 3. Using big data improves your pricing Use a business intelligence tool to evaluate your finances, which can give you a clearer picture of...
by Amanda King | Business Owners
Why You Should Want to Become a Better Leader Want to become a better leader? Wherever you live, there are most likely a handful of organizations that offer leadership development classes. It’s a trend that has become the norm as the modern workplace continues to change and companies try out different approaches to increase productivity, engage its employees, and plan strategically. A recent McKinsey & Company study opens with a rather powerful statement – over 90 percent of CEOs have plans to increase investment in leadership development because they view it as the most important human-capital issue their organization faces. Through research, McKinsey & Company, a global management consulting firm that leads businesses, governments, non-governmental organizations and not-for profits, found that a small subset of leadership skills creates leadership success. This is especially true when your employee(s) with leadership potential want to become a better leader. In their study, they used their experience and searched relevant academic materials to create a list of 20 leadership traits. Then, the firm surveyed 189,000 people in 81 diverse organizations globally to analyze how frequently distinct kinds of leadership behavior are applied within their organizations. Finally, they divided the group into organizations that showed strong leadership performance and those that had weak leadership performance. According to McKinsey & Company, “What we found was that leaders in organizations with high-quality leadership teams typically displayed 4 of the 20 possible types of behavior; these 4, indeed, explained 89 percent of the variance between strong and weak organizations in terms of leadership effectiveness.” 4 Leadership Traits You Need to Become a Better Leader Here are the...
by Amanda King | Business Coaches, Business Owners, Certified Public Accountants, Tools
Social Media Increases Product Sales & Brand Awareness The beautiful thing about using social media for your business is that it’s less expensive than traditional advertising avenues like billboards, radio spots or print magazine ads. And, there’s a way to track impressions and the click-throughs rates to your website, which allows you to understand how those results translate into return on investment. Professional service providers: here are our top three tips for using social media in order to grow your business: Hire a Skilled Social Media Manager, If Possible Even if you’re a small consulting firm, hiring a skilled social media manager to oversee your social media channels is crucial. There is a stigma that the field of social media is centered on creating content and simply posting it. But, there are actually a lot of creative and technical moving parts behind the scenes. And, when you’re busy focusing on business, you need someone on your team that has the skills to write creative marketing content, research, engage with brand advocates (followers who like your product or service so much they’re eager to tell others about it), and then analyze content – differentiating between what’s working and what isn’t. If hiring a social media manager isn’t in your budget, hire an intern. Many colleges and universities offer social media/social media marketing programs. The first class of students to go through these programs will most likely be graduating around the end of this year. Tapping these new graduates will be cost effective, as well. Identify and Engage Brand Advocates and Industry Influencers Whether you are able to hire a social media...
by Amanda King | Business Coaches, Business Owners, Certified Public Accountants, Resources
Key Financial Ratios Help Manage Your Business Your attention is usually focused on a key area within your company. Maybe that’s in marketing, sales or technology. Handling the financials may not be your forte. But, it’s important to be able to analyze your company using business profitability ratios. Financial ratios are used as indicators that allow you to zero in on areas of your business that may need attention, such as liquidity, profitability, operational efficiency, and solvency. Financial ratios are also useful tools in forecasting and financial analysis. They allow you to set specific goals and track your business’s progress toward these goals. It’s important to choose financial ratios that apply to your business. There are hundreds of financial ratios out there and while some of them apply to all businesses – there are some specific financial ratios by industry. Here are the top five most powerful and widely known financial ratios you should use in order to make your business succeed: 1. Net Profit Margin This ratio is the most important measurement. With this ratio, you can understand how each dollar earned by your company is translated into profits. How to Compute Profit Margin Ratio: Net Profit / Net Sales It indicates how efficient your company is at its cost control. For example, a higher Net Profit Margin means the business converts its revenue into actual profit more effectively. You can use this ratio to compare yourself to your industry peers, as well. 2. Current Ratio This ratio is a performance measurement of a company’s liquidity. The measurement determines if your business has enough resources to pay its debts...
by Amanda King | Business Coaches, Business Owners, Resources
How Financial Analysis Can Fuel Your Tactical Execution for Growth Successful business owners consistently evaluate the performance of his or her company and compare it to industry peers and competitors. But, whether you’re a business owner or an advisor, reading between the lines of financial statements is essential for the company’s tactical execution for growth. Analyze Financial Ratios Financial ratios are important financial analysis tools that can you help you implement action plans for profitability, leverage, liquidity and more. This is a traditional financial statement analysis tool. While ratios mostly report on a business’s past performance, they also act as a strategic predictor tool that pinpoints a business’s weak areas. Then, the owner can start improving this area in order to optimize growth. This gives you a 360-degree view of your business allowing you to look at past and present performance as well as financial projection for the future. Horizontal Analysis You can analyze financial ratios during your current financial period compared to the past year of your company’s financials. This is known as a horizontal analysis. The number of years you can compare financial statements will rely on the financial analysis software you are using. For instance, IndustriusCFO allows you to compare up to four years of financial statements (if you have four years’ worth of statements). This comparison will allow you to identify good and bad trends and adjust your business practices accordingly. When you compare your company’s financials to another company’s financials, you can see exactly how your ratios stack up against each other. However, if you’re analyzing a startup’s financials, you wouldn’t be able to...
by Amanda King | Business Owners, Resources
How to Identify Potential Risks Financial Risk Analysis looks at a company’s problems it could potentially encounter in daily operations. When changes in financial markets, legal liabilities or even manmade disasters occur, business operations can be disrupted. Once you identify potential risks, you can then prioritize them and take action steps to handle them, which include avoiding the risk, reducing negative effects, accepting the consequences of the risk, or transferring the risk elsewhere. As a growing company, proactively managing business risks will help you sustain growth. But, before you start identifying risks, assess your business. Ask yourself what could affect key services you offer or what could affect your staff. There are four main categories of risk you should consider to help you identify potential risks within your business: Compliance – These are risks related to the need to comply with rules and regulations. For example, you may need to think about whether health and safety regulations could increase your overhead costs. Strategic – These are risks associated with operating in a particular industry like companies merging, industry changes, or research development. You want to think about the strategic risk of the possibility of a company in China acquiring one of your competitors in the U.S. You want to be prepared with a response by considering different scenarios. Financial – These risks include your business transactions and your financial systems in place. To identify financial risk, examine your daily financial operations, particularly cash flow. Operational – These risks are linked to your company’s administrative and operational procedures ranging from your IT systems, to regulations to recruitment. For instance, if you’re...
by Amanda King | Business Coaches, Business Owners, Certified Public Accountants, Resources
Why You Should Be Benchmarking If you are a business owner, an accountant or business coach advising a growing business, measuring the company’s performance can help improve productivity and profit. Measuring performance keeps track of the business’s progress and gives you information to implement a target-setting system allowing you to strategize a plan for growth. Benchmarking a business is the process of evaluating it and comparing it to other businesses or internally based on measurements. It’s a great tool for improving your understanding of a company’s performance and potential. Who You Should Benchmark Against You can benchmark internally within the business. For instance, you can examine performance among departments within the company. Or you can compare the business to other businesses in the same industry. Yours or client’s company’s objectives and market position will also play a role in the comparisons you’d like to make. Info Entrepreneurs, a team of business information experts from the Board of Trade of Metropolitan Montreal says, “For example, a small business in a crowded sector may want to benchmark itself against average performance levels in the sector. But a business targeting rapid and significant growth may choose comparisons with an established market leader.” What to Measure Different industries and companies within an industry measure success differently. But, these financial measurements or benchmarks provide a quick evaluation of a business’s financial health: Net Profit Margin – This is the most important measurement. It is calculated by dividing net profit by revenue. By using this, you can understand how each dollar earned by the company is translated into profits. Liquidity Ratios – You should review two...
by Amanda King | Business Owners, Resources
How To Get a Business Loan Applying for a business loan is an exciting start in your journey towards entrepreneurship. But, it can also be a stressful and intimidating experience. The good news is that state and local economic-development agencies and various nonprofit organizations provide low-interest loans to small business owners who may not qualify for traditional commercial loans. Whether you are applying for a business loan through these lending institutions or applying for a traditional commercial loan, these four tips will help you prepare for this next step in your career: Research Lender Options You need to do your homework on the financial institution in which you’re considering applying for a loan from. Lenders can perceive ‘good risks’ differently from each other. Whether a business owner and the business is a good risk is a major concern of any financial institute because regulatory requirements sometimes influence the types of loans that can be approved. Script Out Your Need The top reasons for declined loans are related to the quality of the business’s earnings or cash flow or the business’s insufficient collateral. In order to meet the lender’s requirements, make sure you ask a lot of questions to eliminate any confusion. Then, have a detailed plan of how you are going to use the money and how you are going to repay it. For instance, identify whether you plan to purchase new equipment for your business or whether it will go towards working capital. You may have a different reason for why you need funding, too. Also, explain what caused you to need help with funding. The document you prepare...
