When it comes to running a new or small business, there is so much more than profitability to consider.
As an entrepreneur, it’s crucial to gauge how your business is performing to ensure that it is sustainable.
These are two very different types of businesses and each should be handled completely differently. Naturally, the bigger your business grows, the larger the potential reward, but it comes with increased risk and responsibility. The two different business types also translate into different lifestyles for the business-owners. What sacrifices are you prepared to make for your business?
Assessing your business
It’s important to make regular assessments of how your business is doing. If you fail to do so, you could fall into the trap of deluding yourself and not grasping the real financial standing of your business.
Analyse the performance of your business across all of the metrics listed below on a monthly basis:
What the business does. What service or product are you offering?
Who the business aims to reach. Who is the target audience that will pay for the product or service?
How does the business make money?
Are you covering the monthly costs of running the business?
How are the products or services priced and how much needs to be sold every month in order to break even or make a targetted profit?
How does the target audience find out about the availability of the products or services?
How do customers access the products and services?
How is cash flow managed?
Each of these elements requires at least one target or goal, because they are all critical to the success of the business.
No matter how well you are doing on most of the elements, if one of them is being neglected or ineffectively managed, it puts the entire business at risk of failure. Consistent care and attention will open up the potential for more growth and less risk.
One of the aspects of business that needs attention continuously is long-term viability. Just because it’s making money today, it doesn’t mean that it always will. Continuously think about how you could evolve your business, what you could do that no one has tried yet and what others could do that might reduce your profit. Believing that everything will always stay the same is a fool’s paradise and will not end well for you.
Author: Gesture Chidhanguro