Friday, January 16, 2009

Know Your Business Or Know You Will Fail

Too many times business owners get so wrapped up in their business that they forget about running it and end up failing miserably. They may be the best at what they do but if they lose track of any aspect of their business they can wind up playing catch-up or eventually simply giving up. The majority of new business owners get off to a good start based on a viable business plan, but once in the heat of the battle forget about the plan and learn the hard way that winging it is not going to make it work.

It is one thing for the plan to call to make a set dollar amount of sales every month, but if it does not specify how it will make that goal, the plan will fail. There is an old business saying that states failing to plan is planning to fail and in any business this is true. However, if the business owner cannot say on a daily basis where they are at in meeting that goal, they will not reach it.
For example, if the plan calls for $10,000 a month in sales and on the 15th of the month sales are only at $3,000 chances are they will miss their goal by $4,000 for the month. On the 15th it is too late to make up the other $4,000 for the month. Tracking the progress on a daily basis will make it easier to hit the numbers over the 30-day period. Knowing they have to do $340 in sales every day to hit the $10,000 mark if at the end of day one they are at $300, they have to take steps to add another $40 to the next day's business.

If sales exceed their expectation they cannot slack off and allow the extra on day one to cover any potential short fall on day two or three. They must still aim at the daily goal in order to insure they meet their planned monthly numbers. If they happen to go over the monthly goal for sales, they just need to remember that profit is not a dirty word.

On the flip side, while projecting daily sales they also must project daily expenses. For instance if they plan on expenses to be 30 percent of sales and sales meet the $340 per day, they can spend $102 on expenses. If sales for the day only hit $200, they are going to have to trim expenses to $60 in order to hit their planned profit numbers. In some businesses, expenses may have to be tracked by the hour to meet the goal for the day as waiting until the end of the day to find out the expenses exceeded the goal, meaning expenses from the next day will have to be cut.

With any new business, it may be difficult to forecast income and expenses on a daily basis, especially when the environment such as bad weather or supplier issues can influence the daily business. However, by staying on top of the business the owner can maintain better control over the profit potential.

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