7 Practical Tips To Running an Empowered Small Business
Running a small business has a feeling of liberty about it. Be your own boss, control your own destiny, make your own decisions and travel your own journey. Your work/life balance can be controlled by you and not your employer.
But there is a dark side that isn’t talked about for many small business owners. Small business as a rule of thumb is dominated by taxation and cash flow issues. What ensues is a heavy focus on credit cards and the banking system as a fix, but this transfers the problem and causes an increase in fear and anxiety.
There is a light at the end of the tunnel but you have to first see the cage you have created for yourself.
Typical situations small business get themselves into:
Spending cash that should have been accrued (saved up for) to be used for tax liabilities.
Reliance on growing your business from repeat capital raising.
Having an originating revenue business model (as opposed to recurring revenue) where you have a bad sales month.
All three lead to debt or foreclosure and inevitable stress. Here are my top seven practical actions to a better business.
1. Calculate Your Cash Flow for the Current Month
Add up your current available cash – bank balances and available credit on cards.
Add up expected income from sales (see your receivables list on your Saasu dashboard).
Add up new business cash flow. Maybe assign likelihood to these and only count the ones that are at least 80 percent likely to happen. And only count on some of those clients paying on time. (See your pre-quote opportunities and estimates in Saasu sales list screen which can provide these or source it from your customer relationship management system or your paper quotes).
Add new funding such as equity, loan drawdowns, new credit cards (bad idea) and family money (very bad idea).
Subtract bills due this month including tax payable and payroll (see your payables list on your Saasu dashboard).
In short your cash position = CASH + SALES DUE + NEW SALES + NEW FUNDS – BILLS DUE
Once you have done this you need to make sacrifices. If you haven’t got the stomach for this then you really are more committed to ongoing cash flow stress and the payoff from this than you are to fixing it.
The payoffs for less cash flow stress are increased lifestyle, flamboyance, hope (spend to grow strategies) and many more.
Be honest with yourself. What can you add to (1) and what can you cut from (4). If you are relying on (3) you are simply delaying the problem and adding risk to your cash flow instead of de-risking it.
You must transform your cash flow to be neutral or positive. Take the pain but then at least you will sleep well at night. This will give you back passion or enthusiasm for your business.
2. Reinvest Profits to Grow Your Business to Reduce Tax
By increasing your equity value instead of taking profits you can push out your tax liability until business sale time. That’s when you’ll have money to pay tax. However, do this in respect of other legal entities you have and your personal tax position – plan this with your adviser.
Don’t pay the government a cent more than you legally have to. The lower and upper classes certainly don’t. Don’t forget you are seen to be the tax sheep of the economy.
3. Avoid Credit Card Debt in a Business
If you seriously address point (1) in your cash flow calculation then awesome, you get to start winding down your credit card debt over time.
Many (read as most) small businesses are run on credit cards. Owners wake up in the morning and check their bank account for incoming cash and mentally match that against available credit on their cards to work out what bills they can afford to pay.
They are doing mental cash flow math on the fly. It might be about meeting the next pay run or meeting the next tax bill. This is the most common small business ritual around money I see.
4. Power Up Your Staff
You won’t have 100 percent A-grade hires in your business – your kind heart might be hanging onto poor performers.
Employees can be revenue decimating rather than creating. You will need to fire, retrench or coach. The team impacts cash flow more than any other element in business.
I’m a big believer in coaching, and most employee issues can be improved or completely fixed with good coaching (and it allows you to hold onto the kind heart).
Often the problem with employees is actually you, the business owner. This is the hardest pill to swallow. You have to consider that your management style and your employee policies steer employee performance.
5. Fix Your Sales and Marketing Flywheel
What does your flywheel look like? How many sales and marketing rituals do you carry out in a regular ongoing way?
List them down. What ones have you stopped and started in the last year? Marketing is repetition, a flywheel that you add momentum to with new rituals. You can slow it down with friction, bad email content, bad sales process, etc.
Test > Measure > Adjust > Scale lots of different sales and marketing techniques and watch that flywheel grow.
6. Transform Yourself
To accept there is a problem in your approach to running a business is the first step to fixing it. Three classic weaknesses are communication, approachability and blame.
Coaching conversations are positive troubleshooting for people and works much better than blame to fix things. Literally tell them you want to have a conversation that is a coaching exercise.
Failure is very rarely about a single person. Failure is nearly always the outcome from a system or series of events and thus blame is an inauthentic reaction to failure.
7. Manage Your Team and Products Effectively
Listen, learn, think. Make better decisions more and work less. The best managers can listen to their employees, their clients and the market.
Some easy examples are to revisit supplier relationships. Are you being treated with respect? Don’t buy into high price justifications. There are plenty of great value products and services out there that won’t gouge your wallet.
Revisit pricing of your own products. Do this quick check:
Who costs you the most but pays the least?
Who is the most profitable and loyal, your Royal Loyals?
Is your marketing and sales plan prioritising this group?
Minimalism in business is a fantastic way to reduce costs, create focus, efficiency and it just feels great.
Execution is everything. Don’t attempt to do all of this at once. It won’t work, or if it does it won’t sustain – I’ll put money on that.
Just nail one or two of these ideas each week or month. It won’t take long and you will have formed several long term rituals for the betterment of your small business.
My top tip is to keep sharing with as many people as possible how you are transforming your small business. Give them the detailed rituals you are adding and removing. As you share your story you cement it into your being, it becomes your mission and you also cement it into others and how they start seeing you as a transformed business. They get inspired, you get inspired and you get passion. It brings the change into reality.
I’d say good luck, but I don’t believe in that. Go and make some luck.
This is an edited version of a post that first appeared on the Saasu blog.