Don't Let the Doom and Gloom in the Media Distract You!

Don’t Let the Doom and Gloom in the Media Distract You!

If you are a small business owner the “psychology” of the day-to-day these days can be discouraging. Don’t let the doom & gloom specialists get you down. Here are a few things to keep in mind that might help you get your mojo back:

  • If your business is down don’t be lulled into thinking that every business like yours is down. There is opportunity in more places that you might be currently considering.
  • If the “economy” is down 10%, so what? If your biz has 1% share of market then you only need to get .2% of the other 99% to be back to even. If your small business is off you can do something about it.
  • Down markets are GREAT times to expand. If your competitors are hiding in a bunker there is a lot of room to grow.
  • Want to be more optimistic? Then stop watching the news or reading the newspaper. Instead study up on marketing….especially new ways to market. Believe it or not…….. every business owner can be a better business owner but only if we let someone teach you something.
You can make your business better, more fun, more profitable and more valuable. Get to work.

Document My Systems?…..Which Systems?

Recently I wrote a post about how businesses should document their systems to improve their profits and value.

I received some feedback that went something like this..

“Which systems, there are a million systems in my business!”

Well, you’re correct. Even a small business has many different systems. How you answer the phone, how to install the widget, how to log into your QuickBooks, it goes on and on.

So where should you start?

My advice is to make your first written/documented system the one that is most critical to the success of your business. That means you can rule out how to log on to your computer, how to check voice mail, how to refill the paper in the copier.

Here are some examples of critical systems for various businesses:

  • If you have a staffing firm you need a great system for interviewing potential hires.
  • If you  have an auto repair shop you need a great system for diagnosing car problems.
  • If you own an ice cream store you need a system to make sure the ice cream temperature is always perfect.

What’s the most critical system for your business? You’ll need to decide, then write it down, diagram it, draw it… do whatever you need to do to make sure that someone can do it if you’re on a sail boat in the middle of the ocean.

If it’s in your head it’s only useful to you, if it’s documented it’s valuable.

Why are sytems for your small business so valuable?

Documented business system are far more important than most small business owners believe. I believe that the reason too many small businesses stay small is because they don’t have systems.

When I meet with small business owners and this topic comes up the conversation inevitably sounds like this:

Me, “Do you have your systems documented in writing?”
Business owner, “no, I’m here everyday so I can just tell the people what to do.”
Me, “what if you weren’t here everyday?”
Business owner……. blank stare….

Documented systems are the key to growth. If your business does not have documented systems you can not grow at any meaningful rate for very long and your costs will be needlessly higher. Documented systems cuts down on training and turnover of personnel, both of these lead to higher profits.

If you want to really improve your business and your day-to-day work life….. start today and write out one system.  Choose one that’s easy and that you can immediately review with your employees (after you’ve written the system check with your employees so they can tell you how it is actually being done vs. how you think it’s currently being done).

Writing out systems seems like hard work, and it is…but not nearly as hard as having to make every decision, every day for your entire business.

For some books that might help you get started click here.

Get those systems in place, I promise your business will be better for it.

Increase your small business profits without spending a dime……

I see and analyze hundreds of businesses every year. What I have found is small business owners (generally businesses with less than $3,000,000 in sales) have a consistent weakness that costs them dearly.

The Problem…….

A terrible lack of effort and intelligence in determining the correct pricing of their product or services. In my practice I often see the exact same type of businesses that are often only a mile or two from each other and their pricing is wildly inconsistent and illogical.

Here’s a real life example:

I am changing names and details to protect the guilty.

Bill’s Auto Service does $950,000 in sales and net profits to the owner, yep Bill, of about $75,000 (it varies quite a bit from year to year)..

Bill called me. He’s considering selling his business and would like me to give him my opinion of his business value. Bill is getting ready to retire and is in pretty good shape but he needs to sell the biz for a certain amount to retire. I meet with Bill and go through the usual stuff. Bill has a nice clean biz with no real “deal breakers” that I can see. When I get to the part where I ask Bill about his pricing he gives me a common answer….
Me, “Bill, how do your set your pricing?”
Bill, “after all these years I have a feel for what my customers are willing to pay for certain kinds of repairs”.
Me, “do your customers ever complain that your prices are too high?”
Bill, “all the time”
Me, “do they ever complain when your prices are too low?”
Bill, “Are you kidding?”
Me, “How would you know if your prices were too low, let’s say on a timing belt change for a Honda?”
Bill, “I guess I’d be losing money, so I’d know.”
Me, “how many timing belt’s for Honda’s do you do in a year?”
Bill, ” I’d say 1 every other week..about 25 a year.”
Me, “If you were $100 too cheap on that for a whole year would you notice not having that $2,500?”
Bill, “Probably not”
Me, “That’s exactly my point.”
Bill, “How do you think I should set my pricing?”
Me, “Let’s do it right now. What would you charge for replacing a timing belt in a Honda Accord?”
Bill, ” $550″
Me, “let’s back up 15 minutes. Since I’m not a customer of yours and you said you know what your customers will pay…how did you decide on $550?”
Bill, “I get your point, what’s next genius?”
Me, “let’s get out the trusty phone book and start calling repair shops in your area and Honda dealers.”

After about an hour we have 9 prices.. lowest to highest – $425, $475, $520, $550, $575, $590, $600, $675, $800. Remember Joe is $550. The $675 price is the Honda dealer.

Me, “Bill based on this info do you still feel that your price should be $550?”
Bill, “No way, I should be able to get what the Honda dealer gets, I can have the customer in and out in half the time and my warranty on our work is better!”
Me, “What about this strategy? Why don’t you price the job at $650 and every time you quote the job you say to the customer..My price of $650 is less than the Honda dealer, I can have it finished in half the time and my warranty is better”
Bill, “that sounds good but what if they go to the other cheaper guys?”
Me, “Bill, those people are already cheaper than you, what difference does it make? Plus if you are making $100 more on each job you can do fewer jobs and make the same amount. You can afford to lose some jobs to the lower price guys.”
Bill, “I guess you’re going to tell me I should do this for all my work.”
Me, “Either you do it or the smart guy who buys your biz will do it and guess what? He will get a bargain because the business is more profitable than you are letting it be. You will sell the biz based on profits lower than what the biz can generate if managed properly, no offense.”
Bill, “Maybe I need to do some work if I want to get full value for selling the biz.”
Me, “I agree, because I would rather sell your business for more money since I’ll make more money!”

The point of this is as a small biz owner you owe it to yourself and your employees to get your pricing right! It’s important and it’s easy.

I am not kidding, the above is no exaggeration, too many small business owners simply pull out of thin air the prices for their products or services.  Are you that owner?

 

Top 5 things you can do in 2010 to increase the value of your small business

Big improvements often come from small changes. What could you do in 2010 to build the value of your small business?

  1. Get professional small business accounting advice and follow it! Get your books set up in a way that makes your profit/loss statement a tool to run the business not just a piece of paper.
  2. Stop trying to avoid taxes the risky (read…illegal way) and start taking advantage of small business tax breaks that are legal. First step, set up a small business retirement plan.
  3. Decide to learn something new this year. You may have been doing the same thing for 20 years and you THINK it’s right…but that doesn’t make it right. No matter how good you think your business is… you are probably wrong. Do you have the nerve to find out?
  4. Hire someone smarter than you this year. Do you have the courage for that?
  5. Tell your employees thank you when they do a good job. Don’t assume they only care about the pay check, they deserve recognition and you have to be the one to deliver it…sincerely. 

Nothing above is too difficult, unless you make it difficult. Now get going, it’s a new year.