So, you have had your small business or nonprofit organization up and running for at least a few months and someone asks you how your business is doing. Do you have a response – and no, “Fine” is not a response. At this time of year when people are working on their tax returns and renewing their business licenses it is important to ask yourself if you really have a handle on how you are doing. It often takes a while for small businesses to be profitable, but business owners need to keep track from the start to understand their situation.
Do you know how many customers you had last year? Your total sales? If your business is a consultant or government contractor, you may have had only a few rather significant clients, and these responses may be easier to give. If you are a retail, restaurant, or personal service business with many customers you should be able to pull this information from your point-of-sales system – do you know how to do that? Other Business-To-Business firms, or Business-to-Consumer companies should also have systems in place, through QuickBooks or a similar product that can give business owners the information that they need to make good decisions. Many small business owners have an accountant or bookkeeper who manages “the books” and does the taxes. However, as a business owner, it is important that you review what they have done and understand it. Remember that help is available from your SBDC in areas such as cashflow analysis if you are not sure about your company’s finances.
As mentioned at the end of last week’s blog, it is also important to measure your marketing campaigns. Do you ask your customers how they found you? Have you activated and regularly use Google Analytics and similar programs to measure how successful your website, social media and ad campaigns are at bringing in customers? Remember that an informed business owner is more likely to be a successful business owner, and make it a point to measure and understand your business operations! You want to be able to respond to the question in the title with “Great – we doubled our profits this year” or “we expect that our current marketing campaign will finally put us in the black”, and not “I don’t know”. Ask questions, set up your systems, and be informed!