10 Ways to Build Your Business
By Nathaniel Gilbert
Page 2
6 Ask yourself if you are utilizing all the benefits of your products and services.
To be truly market-driven, you must understand your market - not just in broad statistical term, but in intimate detail. It is not sufficient to say, "My company needs more customers like our best customer." You must understand how and why major customers use your products or services. It's easy to find out - just ask. Don't assume. Explore the subject in detail with all your major customers. They may reveal one or two important benefits you and your customers are aware of. Then it's up to you to translate your customers' suggestions into marketing and production changes.
Ells observes that many entrepreneurs don't pay enough attention to marketing, and tend to neglect the recruiting and training of salespeople. "Entrepreneurs in manufacturing tend to prefer to stay at the factory, concentrating on production and administration," he says. "Yet most significant new ideas come from being out in the field rather than shaving nickles and dimes off production and administrative costs."
(For more information see "The Market Planning Guide : Creating a Plan to Successfully Market Your Business, Products, or Service" by David H., Jr. Bangs).7 Consider the use of subcontractors.
In today's fast-paced business environment, particularly in view of the global marketplace, the nature of make-or-buy decisions has expanded. Every area of your business - from building subcircuits to selling your product, from packaging to payroll - can be handled by independent subcontractors. If General Motors subcontracts dashboards and car seats, why shouldn't you obtain the products or services of others, too? Your guide to follow here should be what the customers need and want, not the limitations of your own expertise, facilities or your ego.
In many cases, subcontractors may be able to do the job for less money than it costs you to perform the function internally. (This assumes you have accurate and updated cost accounting.)
But saving money is not the only benefit of using subcontactors; you may also enjoy distinct technological benefits. Most likely, at least one subcontractor will have advanced products or processes you have not been able to integrate into your existing operations due to lack of time, money or expertise. Another benefit may be savings gained from "just-in-time" deliveries. These deliveries often help solve production, labor, storage, and warehousing problems.
Ells says too many entrepreneurs fall in love with assets: "They want to concentrate on building their own plants and controlling virtually every aspect of production. But this involves making very large investments, usually inadvisable in the first or second stage of development. The more you can subcontract and pass the overhead charge to someone else, the less cash you will require initially, and the more money you have to expand."
However, Sherman warns, it is important to know suppliers' reputations. "Cost is never the only consideration," he says. "If a supplier cannot deliver the quality of goods you have ordered on time, it can have serious marketing and financial ramifications for your company."
(For more information see "Strategic Outsourcing : A Structured Approach to Outsourcing Decisions and Initiatives" by Maurice F. Greaver).8 Use your time and talent to their fullest potential.
The biggest personal problem every business owner faces is distinguishing between being busy and making money. One of the basic paradoxes of being an entrepreneur is the need to be self-reliant, yet delegate functions and authority to others. Many entrepreneurs like to boast they can do every job in their organization better than anyone else can. But consider the absurdity of this claim, even if it is true.
Why in the world would any entrepreneur value his or her time in such a perverse way? You don't have to be a time-management expert to figure out your contribution to your business is not that you can do everything, but that you can do just three things better than anyone else in your organization:
- Bring together all the required resources - staff, money and materials and pull it together to form a profitable business;
- Develop a vision of success and translate this into a sense of purpose and specific goals for everyone in the organization; and
- Take final responsibility for every aspect of your business, no matter how unpleasant.
Entrepreneurs should use the "80-20 rule." Focus on the 20 percent of the issues that give you 80 percent of the profit impact, in other words, 80 percent of the issues out there are waste of time. "The ability to identify product and sales opportunities is more important than figuring out how to squeeze an extra dollar's worth of goods out of a supplier."
Similarly, Ells recommends that entrepreneurs focus on the major elements of costs - those categories of activity that account for 25 percent or more of the product or service. "It's a good idea to concentrate on costs in proportion to their percentage, rather than on those cost categories about which the entrepreneur has the greatest knowledge," Ells says.
(For more information see "Beyond Time Management : Business With Purpose" by Robert J. Wright, Robert A. Wright).9 Remember, you are building a team, not a personal triumph.
Entrepreneurs have to restrain their egos to build a team of intelligent executives rather than hiring competent drones who merely carry out orders. To do this, they must begin to yield pieces of their domain, to delegate authority and responsibility.
Some years ago, I was a consultant to a small, very successful service company during a period when the founder decided to hire a president. This would allow him to become chairman and take more time off to enjoy life. He told me has was drawing up a list of attributes he thought the new president should have. I pointed out to him that would be like a husband predetermining what kind of man his wife would want when he died. He did not agree, and created a list of attributes that were amazingly similar to his own.
After he chose a leader to fill the job, he then spent a month gathering evidence of this man's inadequacies. Only after this was I able to convince him it was necessary to go through a formal selection process with a personnel consultant.
Some of the most important factors that make up the personality of most entrepreneurs - drive, total commitment, self-reliance and resourcefulness - also stand in the way developing an organization that includes other strong leaders and individuals. It usually takes all the diplomacy and authority a consultant can muster to help the entrepreneur in this particular area.
(For more information see "Smart Staffing" by Wayne Outlaw).10 Write an annual report.
An unnecessary fuss and expense for a small privately-held company, you say? Don't be so sure. Most entrepreneurs rely on their gross sales, cash flow, number of employees, tonage shipped, or tax filings to ascertain their progress. All of these references are interesting indexes of progress, but they're not a particularly good way to evaluate your company. That's certainly not the way a bank or a buyer would evaluate it.
A small company's annual report doesn't have to be fancy. Rather, it should honestly reflect whatever modest accomplishments the company has achieved at this stage of development. It's best to think of the report as a confidential internal document for restricted circulation, not much more elaborate than a 10-page memorandum. But it should contain all the basic information found in a large corporate report: accurate descriptions fo purpose and plans, facilities, product, services and markets, as well as a formal financial statement and a detailed analysis of it.
Seen as an opportunity to reexamine every aspect of your company from the standpoint of a potential investor, lender or buyer (and perhaps in preparation for presentations to such people), the creation of an annual report is far more than an academic exercise. Particularly when done by an independent accounting firm or business consultant, it is the only honest way to face all the realities . . . before others do.
Salamone says preparing the annual report should be part of the next year's planning process. "This ensures that you find out what you did and why you did it," he says, "and what you should do to rectify mistakes and increase growth."
You may be delightfully surprised to find you've make more progress than you think, that your business is sounder than you realized, that you have certain operations, or markets, or assets which are underdeveloped or underutilized, and that you can use the annual report as a basis to obtain more credit or capital without substantially straining your cash flow or sacrificing a large portion of your equity.
The main thrust of these 10 points is to alert you to the need for more information and more control. Most small-business owners pride themselves on their ability to think fast on their feet; but that's really crisis management - not the stuff long-term success is made of. It's those old problems of seeing the forest when you're surrounded by trees, and draining the swamp when you're up to your elbows in alligators.
But remember this: There was a time when your business existed only in your mind, and you developed the idea and made it a reality. You achieved success in the first stages of development; now, don't shut the door on your imagination. Keep thinking first and doing second - and you'll keep moving forward faster.
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_______________________________________________________________________________Nathaniel Gilbert is a journalist and business analyst in Westport, Connecticut.
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