Internet Radio Show | 21st Century Entrepreneur: Developing a Successful Business Model | Aired Friday December 5 at 12 Noon
This Friday December 5th we will be airing another program of the “21st Century Entrepreneur” which is an Internet radio program aimed towards educating business owners and their advisors on how to make their businesses more successful and profitable. It is a show hosted by JC Maldonado who is the CEO of BizGro Partners, a Business Development Firm that helps small and midsize companies grow, expand, and transition. This week we will be discussing the components that are needed to develop a successful business model. Below is a blog discussing the 4 key growth areas of any business. Finally, we have had some exciting interviews with interesting business people in the last month or so. To hear a recorded version of past shows, click on the LED icon below:
The Four Key Growth Areas in Any Business
Many entrepreneurs struggle with implementing business growth strategies. There are many business advisors that try to help entrepreneurs look at their business holistically. These advisors say, “clarify your vision, get your processes in order, get a hold of your financials/data, and develop systems for accountability.” All of these tenets are extremely important, but these mantras do not represent external business growth itself that an entrepreneur can run to the bank with. Rather, this kind of attention represents internal cleanup that is necessary for the preparation for future growth, but it is not growth itself.
Further, part of the reason entrepreneurs struggle with growth is the inability to focus on what areas to grow and having no clear concept of what area of his/her business is most important to grow personally. For instance, the business owner who wants to create wealth in his business and develop an asset with big time marketplace value with 3rd party buyers may have to forfeit personal income or have to pay higher taxes in order to demonstrate clean books and records. Further, the entrepreneur that likes to take home substantial take home salary along with substantial dividends may want to reduce tax liability with legitimate tax avoidance strategies that could result in financial statements that lack transparency. Today, we will outline 4 key areas of business growth so that you the entrepreneur can determine what areas you would like to concentrate on. Of course if you can develop growth in all four of these areas, you can develop a world class business.
A business must grow its sales in order to prosper. It is important that as an owner, you are not looking for more sales for the sake of making more sales. Today, you must make sales at a profit in order to prosper. This means the price in which you sell your product or service must exceed your costs associated with making that sale. You may say that is simple enough but you would be surprised to hear all the horror stories we have come across regarding businesses that service customers that produce little to no profit. When you think about it, there are only 3 ways to drive sales upward: 1) Retain existing customers while getting them to buy more; 2) Buy customers through the implementation of marketing strategies; 3) Buy customers through business acquisitions. Further, the key to increasing sales is making the decision that as a business you are going to conduct yourself as an organization that is sales and marketing driven.
A business can grow by simply producing more profits. 3 ways to increase profits are to 1) Simply make more sales at a profit; 2) Reduce operating expenses; 3) Reduce the cost of sales. Increasing sales and reducing operating expenses is productive but the CFO really earns his/her keep through the proper management of the cost of sales. Cost of sales by our definition is simply the cost of the goods and labor necessary to make, deliver, or provide your product or service. A simple 2%, 3%, 5%, or 10% reduction in this area can add thousands and in some cases hundreds of thousands of dollars to the bottom line. It is important to analyze your vendors and labor force that make up your cost of sales at all times.
Profitability without cash flow is simply an illusion. If you cannot receive profit in your hands, what good is it? Cash flow is a killer for most businesses and it normally stems from one very simple problem; the business’s terms with its suppliers are worse than its terms with its customers. In other words, many businesses have to pay their suppliers a lot faster than the time it takes to collect money from customers. If these dynamics are not properly managed, profitability is never enjoyed because you will always be chasing your tail. It is important to negotiate proper terms with suppliers and in some cases get them to support your business as you grow. Remember your growth can have positive ramifications on their business and they must realize this. Further, don’t become the bank all the time with your customers- develop disciplined collection strategies so that you can always have cash in the bank. Remember as an entrepreneur you cannot run out of cash and you must always find further ways to generate more of it.
Do you own a business or do you own a job? Your business no matter how you run it will possess some sort of enterprise value. The problem is that for most owners, their business is not worth what they think it is. A simple way to determine whether your business has real enterprise value is to simply ask yourself, does the business run without me. If the answer is yes, then you may have a business that you can sell to a 3rd party for substantial value. If the answer is no, if you were ever to sell the business, you the owner would have to come with the deal. One simple way to grow your enterprise value is to increase your earnings while developing your business in a way where it has less dependency on you as an owner. This is a perfect measuring stick of whether you are growing your business’s enterprise value.
To learn more about business growth strategies, email us at email@example.com.