Everything you do in business is going to take some combination of your time, money, and materials – things that are usually in limited supply. Planning ahead will help you to use these limited resources to your best advantage. Think through your goals and how you’re going to achieve them. Be realistic and specific: who’s going to do what, by when? Think ahead about your business budget. Consider how much money you’re going to need, when you’ll need it, and how you’ll use it. Consider what you hope to get in return for the money you spend. This is called your return on investment, or ROI. To start building a new business, ask yourself some basic questions: What products or services will I provide? Who will be my customers? How will my products and services meet my customers’ needs? As you gather the answers to these and related questions, start putting your plan down on paper.
Whether a small business is a manufacturer, retailer, or service provider, all small business owners are involved in buying, also called purchasing. Since profit is the difference between how much you spend and how much your customers pay you, it pays to save money wherever you can. Being a smart buyer will help your business become more profitable. To be a better buyer, think of your spending in categories. That way you’ll see how you’re spending your money – which will help you to make better business decisions. If money is tight, you’ll be able to quickly spot where you might be able to cut back. If you have money to spare, you’ll see how you might use it to grow your business. This is called reinvesting. Being a skillful buyer also means you’ll get the quality you need in the things you buy – and avoid wasting your money. Finally, being a good buyer means you’ll have the goods and services you need when you need them. Timing is important in business.
“Producing” means providing products and services for others to buy. Manufacturers call this the production process. Service businesses might call it the service delivery process. Improving your production process can improve your profitability. For example, if you can figure out how to save money by delivering your product or service more quickly or inexpensively, you can increase the amount of money you make. If you can deliver products or services of higher quality, you’ll probably make more sales. Or, if you can find ways to package or deliver what you produce in ways that are more convenient for your customers, your sales will probably go up.
In order to sell, you have to understand your customers: what they want, how and when they want it, and what price they’re willing to pay. Customers must have a need for what you’re offering. They must know that your business exists and be interested in buying from you. They must believe that your product or service will meet their need. Finally, they must feel comfortable that the price you’re asking is reasonable and affordable for them. Also, consider your payment policies. Depending on what you‘re selling, you need to decide not only how much you will charge, but the timing you require for payment. For example, some businesses charge 50% when the order is placed, and 50% on delivery. You also need to decide whether to extend credit to customers, in what amount, and for what length of time.
“Tracking” refers to the skill of keeping good business records. Unless you keep track of the money in your business, and what you buy, produce, and sell, you could be losing money and not even know it! Keeping track is also important for filling out your tax forms accurately. Keep your money records accurate and up-to-date. Track your deposits, withdrawals, and current balances; how much you owe and how much customers owe you. That way you’ll always know how much cash you’ll have on hand. Keep your business and personal records separate so you can clearly see how your business is performing. Also, track information about your sales efforts, your customers, and your product or service delivery process. By tracking useful information, you can make smarter decisions to improve the efficiency, sales, and profitability of your business.
Managing means having a vision of what you want your business to become, and constantly adapting to change in order to guide it toward those goals. If you have employees, managing also means being the leader of a team that is critical to your success. Most experienced business owners consider their employees to be their company’s most valuable resource. They represent your business to your customers, your suppliers, and to the public. They must believe in your business and commit themselves to doing good work in order for your business to succeed. For most businesses, employees are also their largest expense – so they can’t afford to have people who are not productive. (Remember that the total cost of employees includes not just their salaries, but also benefits, payroll taxes, and the time and expense involved in managing them.) You can learn to be a better manager by working for or listening to experienced managers who have learned from their own mistakes and successes.