Focus only on your primary
operations at first. That is, avoid being caught up in
every business opportunity that comes your way. It's better to be perfect at
one thing than mediocre at five. This applies as much to making decisions to
diversify your business as it does to deciding to take on additional projects
for yourself outside of your primary business. Focusing on one thing will allow
you to commit all of your resources there and be more productive in that
endeavor.
- Continuing with our example, imagine that you see another coffee shop making money by selling customized coffee-related merchandise. This may make you want to jump into this market as well. However, doing so before establishing your primary objective, making coffee, would introduce significant risk, and may detract from your ability to focus on coffee quality.
Keep detailed records. In order to be successful, you'll have to make a habit of
recording each and every expense and revenue that your company has, as well as
every dollar that flows through it. By knowing where exactly your money is
coming in and where it's going, you're more capable of recognizing financial
difficulties before they arise. In addition, doing this will give you a better
idea of where exactly you can make cuts to expenses or increases to revenues.
- For example, in our example, you would keep detailed records of how much coffee you bought and sold in a given month and what you paid for it. This could you help you identify if, for example, the price of coffee beans was steadily increasing and help you plan whether or not to raise your own prices or consider switching suppliers.
Limit expenses as much as possible. While this may seem obvious, just try to think of areas
where you could generate the same effect by spending less money. Consider using
pre-owned equipment, finding cheaper forms of advertising (for example, fliers
rather than newspaper ads), or negotiating better payment terms with suppliers
or customers to save a few dollars here and there. Try to maintain very low
spending habits and only spent money when and where you absolutely have to.
- In our example, this could mean starting out with used coffee grinders (as long as they still functioned well) and trying to get as many supplies as possible from the same supplier (cups, lids, straws, etc.).
Consider supply chain efficiency. Your costs, and therefore your profits, depend on a
successful supply chain organization. By fostering good relationships with your
suppliers, organizing deliveries, and consistently providing customers with
timely service, you can increase your profitability and reputation. Successful
supply chain management can also help you eliminate any part of your business
with wasted resources, like raw materials or labor.
- For example, our example coffee shop would want to be on good terms with its coffee bean supplier and have an organized supply chain structure for a number of reasons. This is especially crucial for ensuring that you never run out of coffee, but could also mean that you could get more consistent deliveries, try new types of coffee bean when they become available, or negotiate lower prices.
Consider finding strategic partners. Much like a good mentor, a strategic partner can provide
you the boost you need to grow your business. Foster strategic partnerships by
reaching out to businesses you think could benefit yours, whether they are
suppliers, technology providers, or complementary businesses. A good
relationship with another company can provide you both free advertising, lower
your costs of doing business, or allow you to expand to new markets, depending
on the partners you choose.
- For example, your coffee shop could benefit from a strategic relationship with a supplier that gives you access to discounts or new products. Alternately, a strategic partner in a complementary business, such as a pastry shop, could help you both reach new customers and increase your revenues. This could be done either through recommending each other or by offering product's from your partner's business and vice-versa.
Be responsible when it comes to
debt. It's very important that you
realistically assess your ability to pay back any debt that you take on. While
starting and running a business is always risk, try to minimize your
liabilities by only taking out as much as you absolutely need. And when you do
take on debt, be sure to structure your cash flows such that you are paying it
off as quickly as possible. Prioritize debt repayment before you do anything
else.
- For example, if you took out $20,000 to get your coffee shop started, don't think about expanding your product offerings or upgrading your coffee grinders until you've paid that loan back.
