This is a “How to get your business off to a good start in the New Year” column, without any resolutions. You’re welcome.
It’s about fundamentals that have served businesses since proto-market was born when Og dropped his club and suggested to Gog that they do business instead of killing each other for what they wanted. If you’ll find a way to incorporate these ten fundamentals into your daily/weekly/monthly management practices this year, you’ll have more fun because success will come and play in your backyard. If you don’t, well, you know.
1. You must produce and manage with regular and accurate financial statements: profit and loss (a/k/a P&L, a/k/a operating statement) and balance sheet. In business, you can’t get where you want to go if you don’t know where you’ve been.
2. Someone in your business is likely managing cash every day. But you also need to project and manage future cash conditions over at least 12 months on a computer program like Excel. Since, as the owner, you’re the one who figures out how to cover a future cash shortfall – with more sales, expense reduction, or a loan – I recommend you for that job.
3. You can succeed yourself out of business if you don’t understand the relationship between accounts-payable-days and accounts-receivable-days. This perspective will provide you with a better understanding of the impact of time on cash and how insidiously success burns cash.
4. Declare war on excess inventory. Unless it’s turning or paid for, no piece of inventory should spend the night under your roof. Successful inventory management means just-in-time, not just-in-case.
5. Convert non-performing assets to cash. Most things are worth less today than last year, and they’ll probably be worth even less tomorrow. If something isn’t being used, take the hit and cut it loose.
6. Employees spend a lot, if not most, of your cash. Ask them to identify ways to find efficiencies and maximize margins. Tell them their motivation for helping is called “job security.”
7. Review all operational steps and eliminate or fix inefficiencies. My friend, Michael Stallard, recommends the four “Ws,” “What works, what doesn’t, what do we stop, and what do we continue.” Let employees help with this too.
8. Outsourcing is an increasingly powerful best practice. Call a meeting with your team and ask “Blasingame’s Outsourcing Power Question” about every task in your operation: “Must this be done in-house?” Everything that doesn’t directly “touch” a customer is a non-core competency and a candidate for outsourcing.
9. Keep your banker informed about business opportunities AND challenges. The title of the shortest book ever written is “Loan Officer Courage.” An uninformed banker is a scared banker, and no one ever got a loan from a scared banker. And if you don’t have a banking relationship with an independent community bank, start one this week. This isn’t a banking alternative – it’s a small business imperative.
10. Every customer and prospect has expectations that are changing faster than ever before. Whatever you’re supposed to be doing tomorrow or next year is in the head of your prospects and customers. Keep asking what they want and deliver what they say. Remember, you get to decide what you do; your customers decide how you do it.
Write this on a rock … There’s a reason some things are fundamental. They work – every time.