Even prior to the disastrous outbreak worldwide of COVID-19, many small businesses were not running efficiently. What does that mean? In working with small, medium, and Fortune 500, 100, etc. the main differentiator that consistently sticks out is the lack of quantification in small businesses.
Consulting for many small businesses across different verticals, the glaring main common theme is most small business owners do not know their bottom line. How can a business scale and grow if the business operator is unaware of what the operating costs are? What the supply costs are? What is the value of a customer? How many customers a month do you need? What is your payroll cost?
The key to understanding your business and quantifying your business is understanding your business model. What is your business model? Your business plan helps to serve external factors of funding, understanding what you need to execute to secure that funding. Your business model is for the internal use of understanding the operation of your business and how you will make money from your business.
All business owners should understand their trends, sales cycles, latency, seasonality, customer profile to list the basics. Trends help you align your marketing to peaks and valleys to keep your business consistent in down trends and capitalize in up peaks. Sales cycle helps you understand how long it takes your customer to convert and latency helps you understand at what point do you begin interaction with your customer to what point they actually convert. Seasonality is key for pricing and market share. If you are a landscaper in say Florida the way you approach seasonality will be different than if you live in Colorado which has a limited landscaping window. This is where supply and demand comes in to play and how to price properly. Understanding your customer will help you understand what additional targets you can identify and target for additional market share and growth. These key factors should shed insight into why quantification is key for small business health.
Business owners should know what their time is worth. If a Chiropractor brings in $200/hour, pragmatically speaking it makes more sense for business health to outsource the “busy” work which may be marketing, payroll, accounts receivable/accounts payable and will only cost a menial amount hourly such as $35 an hour in comparison to the $200 it is costing for the business owner to take on a task they may not know anything about. This is where a business owner should bring in a business consultant to help quantify their business.
To grow your bottom line or in most cases, know your bottom line, you have to quantify your business and understand the areas of opportunity based on seasonality, trends, sales cycle, latency and truly grow and capitalize on your business.