MyBizRightHand

Most small businesses in their growth phase will encounter challenges that seem redundant and self perpetuating. We call them the vicious cycles of small business. Our job is to help small business owners break free from growth stagnation caused by these vicious cycles. While the challenges presented in these cycles may appear simple, there is no basic solution; usually, it involves strategy analysis and focusing, management and owner execution planning, tactical discipline, or a variety of other strategic approaches.

Every business, and every owner, has a different set of circumstances and objectives; therefore, every business requires a different course of action in order to reach the solution. The examples below are a few common challenges faced by small businesses; but are by no means the limit of possible challenges your small business may encounter.

Business Strategy

The strategy of a small or medium-sized business should revolve around a clear business model with attention paid to the owner's aspirations and needs. In order to establish objectives and a starting point, the owner will need to have a very clear idea of what the business is for, and what it is to achieve. The strategy incorporates a competitive and structural analysis of the business's industry and market. Finally, an execution plan must be developed which defines a timeframe for acheiving objectives, and the people responsible for carrying out the specific actions. Generally, strategic focus is one of our first processes in which we will help the owner define the business model and subsequently define the strategy.

Required Investment and Financing Sources

In order to start or grow a business, an owner must estimate the amount and source of money necessary to begin the process. Unfortunately, access to capital for small businesses can be scarce and expensive. In order to estimate the economic requirements of your business, you will first need to establish budgeting and forecasting processes to create different types of cash flow analysis. Sometimes it is convenient to buy fixed assets, while other times it may be more convenient to simply lease them. The business owner's priorities, and the cost of capital, will help determine if additional working capital should come from credit, minority partners, retained earnings, or a combination of two or more sources.

Revenue Increase

Revenue increases by selling more of one product, adding to the product mix offering, expanding the customer portfolio, or selling the same product to different customers for different applications. The marketing strategy will evaluate the best combination of customers, products, and applications for your company.  It will also evaluate pricing, advertising media, distribution channels, required sales force, and the speed at which the company can reasonably increase revenue based on financial, strategic, commercial, and workforce assets and skills.

Cost Containment Measures

Containment of fixed and variable costs are one of the main objectives to keeping earnings within a healthy threshold. It is important to pay attention to the speed at which cost rises, and which increases are absolutely necessary to the continued improvement of revenue and earnings. Multiple analysis and quantitative tools can be easily applied to discover what is happening to your costs. These tools may include Excel spreadsheets, or even reports provided by accounting software.

Many entrepreneurs fall into the trap of including personal and family expense within the business; therefore, losing the ability to understand the necessary operating expenses. Generally, the ability to obtain fiscal deductions and ownership fringe benefits is confused with true business expense. The business owner should understand the difference between tax accounting, and management accounting. Family-related expense is independent of the business' ability to absorb expenses.

Fixed Assets Analysis

Acquiring fixed assets is generally a big disbursement for small businesses. The paradox of buy versus lease, want versus need, and asset productivity must be analyzed before investing in any fixed asset which reduces the working capital. Sometimes, it can be more effective to outsource rather than perform internally, or more convenient to keep a good perspective on asset utilization metrics.

System of Internal Controls and adequate documentation

A current accounting system and at least basic documentation about the business’ transactions are key elements to gather and analyze the information available; business information helps the business owner make educated decisions. Unfortunately, this is one of the weakest areas of a small business because one of the most common perceptions is that internal forms and processes do not add value therefore organizing and having all transactions current can wait for later; it is this way how the small business owner gradually starts to make decisions with very little information or incomplete and incorrect information. It is a common perception too that accounting is only related to taxes and it is only at tax time that accounting information is required. It is necessary that every business, no matter how small it is, prepares financial statements and performs periodic reviews of the financial statements. These processes are simple if a small amount of time is devoted to them and if a small investment is made in accounting software for small businesses, generally; the pricing for these software is very affordable. As the business grows it is necessary to implement better and more robust operating processes and internal control systems.