Areas of improvement for small businesses

Small business is the backbone of the economic growth in this country. However, according to the Small Business Administration, businesses fail more often than they succeed. Business owners need to make time to look at the strategic health of their business on a regular basis, not just at year-end, or tax time.

For the past year I had the privilege of heading the business advisory department for one of Reno's top CPA firms. I worked directly with business owners, helping them identify opportunities to grow their businesses. During this work with our clients, certain patterns emerged through looking at the financials, talking with the owners, and developing strategies to grow their businesses.

We witnessed critical areas needing improvement on a consistent basis:

Understanding the owner's role: The term "business owner" and "entrepreneur" are frequently used interchangeably. However, they have specific, different meanings in business. An entrepreneur is an individual who has a passion for the business process itself and is willing to take risks with the business, in order to grow the business. A business owner is usually someone that has the specific skills that the business performs, and has grown into to the role via the process of growing the business and providing one's employment.

Both are accurate, neither is preferred, but understand where you fit, so you understand your limitations, and then exploit your strengths.

Work on the business, not in the business:

E-Myth author and small business guru Michael Gerber demonstrates this issue in his book. Continuing this premise, business owners consistently lose sight of the difference between the two concepts. Working in the business is operations; working on the business is the strategy. Business owners traditionally forget the strategic component because they find themselves working so much in the business, just keeping day-to-day operations afloat.

By allocating time every week to step onto a virtual ladder and look at the business from the outside, the owner can identify areas of opportunity and growth for the business.

Understand the financials: More and more it is important to have a solid grasp on the financial operations of a business. Owners can't merely let the finance department take care of things. That means being directly involved in the business through analysis of the books. Letting the CPA handle things just isn't a solid strategy for growth. Instead, owners should ask their accountant to teach them how to read the books. The Small Business Development Center at UNR is a great resource for this kind of help with counseling and workshops. They have financial analysts available to help owners gain a comfort level with their own books.

Develop key performance indicators: Every business is unique and has specific indicators that will convey the overall health and performance of the business. These business gauges are known as key performance indicators, or KPIs.

A few sample KPIs would be:

* Debt-to-revenue ratio

* Percentage of labor to sales

* Increase percentage in customers

* Per-customer expenditure per visit

Working with your accountant or business consultant, you can develop a short list of KPIs for use on a monthly or quarterly basis to monitor the performance of the business's equity, and communicate this performance to stakeholders. Stakeholders include partners, shareholders, owners, key executives, and can even include key vendors and clients. Maybe sharing key information with a vendor seems abnormal, but if you have key vendors dependent on your business, it can solidify relationships and leverage deals.

Growth is imperative: One critical component of a small business enterprise is keeping the business vital in the marketplace. Growing a business ensures this vitality stays at the forefront. As the national business environment looks for ways to move out of the recession, push to grow a business during uncertain times.

All businesses need to grow annually to continue. There is a saying that if your business is not moving forward, you are ultimately moving backwards. By changing how you view growth and harness the entrepreneurial spirit of taking chances and growing towards established goals, you can grow your business.

Marketing on the must-do list: One of the first things to get cut during troubling financial periods is marketing. Savvy business strategists, however, will tell you to increase your marketing budget, while making other cuts. The key to this is making smart decisions. Find opportunities to get the "most bang for your buck" while having a variety of methods of communicating your businesses value. "Touch points" is a term describing each time that your business "touches" a possible consumer direct mail, radio, Internet, billboard, television all provide touch points to your potential customers.

By carefully identifying who buys your product or service, and then analyzing how that audience receives information, you can craft a marketing strategy to drive your business forward. Keep in mind that this needs to be a long-term commitment with a common theme and carefully identified objectives, so you might need the assistance of a marketing or advertising agency or consultant.

The important part is to be aware of your position in the market and to keep pushing out your message during the recession. When business comes back, you will be in a stronger place than having to start from scratch.

Being an entrepreneur is like being the conductor of an orchestra. A conductor puts together a team of musicians, each with a special way of making music through the instrument they play. Then the conductor works the score, making the arrangement his or her own. The maestro then takes dozens of instruments and sounds rhythms, melodies, harmonies, all combining to create a beautiful piece of music. An entrepreneur shares this path with the maestro, leading the heart, soul and passion of the business with the right team, operating the different systems of the business.

Ray Kroc, founder of McDonald's, didn't become a legendary businessman by flipping hamburgers he provided the opportunity for others to be passionate about flipping hamburgers.

Ira Gostin is a marketing and business strategist in Reno. Contact him at ira@gostin.com or www.gostin.com