By Becky Brown, Consultant, UGA SBDC at Georgia Southern University
There is certainly no shortage of business advice out there, and I read just about everything I come across. But sometimes it leaves me scratching my head and wondering who exactly is the person giving the advice and have they ever actually owned a small business.
So as my gift to you, I am not going to give you advice. I am going to share some things I have learned as a small business owner for more than 20 years.
1. Activity does not equal profit.
Have you ever had a customer or employee say “wow, you are so busy, you must be doing great,” when in reality you are not making money? Unchecked activity can make your expenses soar to the tune of a loss. Specific areas to look at are payroll and cost of goods sold.
2. Deal with problems immediately.
Do not stick your head in the sand and ignore problems. This has always been difficult for me since I really don’t like conflict or confrontation. If you ignore a problem, it will get worse. This applies to employees, customers and suppliers. Hit it head on so you can quickly resolve it and move on.
3. Look for funding when times are good.
All businesses go through cycles, and the time to get a loan is when you don’t need it. Yes, it will cost you interest money, but it is difficult to find funding when you are showing a loss or having critical cash-flow problems.
4. Don’t skimp on professional advice.
Unless you are an attorney or an accountant, you will need one. I always thought I was smart enough to review and understand most legal documents, but I did not go to law school and I am not. Likewise with accounting. Tax laws change so frequently it is impossible for a regular person like me or you to keep up.
5. Positive net income doesn’t always translate into cash.
Your P&L looks great from an income side but you have no money. Dig deeper and look at your balance sheet and cash flow statement. Your cash could be tied up in inventory or accounts receivable.
Also look at your terms with suppliers. Many owners like to pay for goods up front. Don’t do it. Having net 30 or 60 is like having a short-term interest-free loan.
6. Do not hire yourself.
People gravitate to people who are similar to themselves. You need to hire people who have talents you do not, especially when filling key positions such as managers. I am a big picture kind of girl who doesn’t like to be bothered with too much detail or actual follow through once I have created something.
Know who you are and hire to complement, not duplicate, yourself.
7. Familiarity can breed contempt.
Small businesses often have a family feel between employers and employees. That is fine as long as everyone understands that at the end of a day it is a business. Due to lower wages, lack of benefits or other reasons, many owners just feel grateful to have any employees they can find.
Don’t be held up by your employees. No one is irreplaceable.
8. Take a breather when you can.
Whoever said “if I am going to work this hard, I would rather do it for myself than someone else” is crazy. You will never work as hard in your entire life as you will as a small business owner.
Take advantage of calm times to restore your sanity. I had an epiphany one day as I stood in my business and realized all was good at the moment and that I was only there because I felt obligated, not because they needed me.
If you need it, I give you permission to take the day off.
9. Think about your end game.
Clients think I am crazy when I ask about their exit plan as they are starting a business. I had an end strategy for every business that I started, and none of them included passing it on to my kids.
I realized they would probably not be interested, and guess what? They weren’t.