18 Jan Everything is Figureoutable
I have heard it said that everything is “figure-out-able” and I certainly wish it to be true for our small business community as we kick off 2021. With 2020 firmly placed in the dumpster fire behind us, I ponder what we can do to figure things out far more effectively and more sustainably in 2021. Bill Gates weighed in on recovering from the pandemic by reminding us that we don’t just rise out of a pandemic overnight in the same way we went into the pandemic. We are going to have to recover slowly, one day at a time, clawing our way out. In the midst of this slow and steady climb to get back to a more “normal pace”, small business owners across the globe are getting crazy creative with how to make it happen in 2021. For most small businesses, financial prosperity is far from a reality at this point, but the good news is that the new Economic Stimulus Package might keep some hope burning for opportunity. Here is a list of my favorite things we can do to support future opportunity and growth as we make this slow climb out of pandemic:
1. Build the internal culture of your business through strong communication practices.
No one knows the exact “right answer”, and public opinion is fractured and broken on how to re-open small business while simultaneously avoiding the spread of disease. All we can do as leaders in our small business is to communicate with our team. Harvard University did a study with over 200 companies and found that a strong internal company culture led to a 756% increase in company net income over a period of 11 year. Communication is at the heart of a strong internal company culture and is as much about listening as it is about speaking. So be sure to speak often with your staff and solicit feedback with frequency. Know that all our spirits have been put through the test lately and so soliciting feedback from staff might result in listening to some serious complaining. Rest assured, good communication is the bridge between confusion and clarity and will result in a stronger culture of A players in your business. You can’t afford to have team members who are not engaged in your culture!
2. Strategic Planning is important. Invest in it!
There are so many great books, coaching programs, and podcasts out there in every industry about how to grow your business, and at the heart of this vast sea of information is the need to plan and be strategic. If there is one thing you can do to make your business more sustainable and effective, it is to work ON the business on a scheduled and regular frequency. Examining processes in all areas of your business, from sales to operations, and financials to quality control will lead to executing with more accuracy and enjoyment. In Mike Michaolwicz’s book “Clockwork”, he states that 10% of your time as a business owner should be spent in the DESIGNING phase. Designing what the onboarding looks like, designing the sales script, the lead funnels, the ongoing client management, the technology stack used, the roles and responsibilities of staff…so much to do in the DESIGNING phase. I love this stuff, I could spend ALL of my work time in the designing phase because it brings out the happy place inside me! If you are faced with more time on your hands as a result of COVID-19, I suggest that you spend more time in planning. Planning outcomes and documenting the processes that work in your business will come in handy when work starts to pick up and you are spending up to 80% of your time in the DOING phase. The 4 Quadrants of Time Management is one of my favorite places to start with strategic planning. Try for yourself and see where it leads you!
3. Understand your numbers!
It is not enough to know your Revenue total and set a goal for Revenue for the coming year. You need to know your Revenue per silo of income and your gross margin by silo of income. You need to know other financial data too, like how many widgets of each type do you need to sell in order to reach your financial goal? How many widgets did you sell last year and what was it that your clients liked about your best-selling widgets and why didn’t they like some of your other products? Visibility and clarity to your financials is everything; it tells the juicy story of your financials and if you do not understand your numbers and why they are the way they are, then you need to learn how to understand them immediately. One of the best places to start is to hire a qualified bookkeeper to not only properly establish your Chart of Accounts, but to make sure that you have access to current and accurate financial reports and that you know what every number on those financial reports means to you. In times like this where Revenue might be in short supply, it is extremely important for you to understand your Lifestyle Congruence number. Your Lifestyle Congruence is the money you MUST earn to survive. With that amount in mind, you need to work the numbers backwards, determining what your fixed expenses are in the biz and how many widgets need to be sold to cover fixed expenses. Then you work on understanding your variable expenses, knowing the percentage of variable expenses, aka the cost of goods/services sold will help you with powerfully determining how much you must sell to cover your variable expenses + fixed expenses + your owners pay. This amount should be broken down into monthly and weekly goals so that when you get up on a Friday, you can immediately know how much of which widget do you need to sell to meet your Lifestyle Congruence goal. Since these may likely be hard times for your business, I suggest developing three different scenarios for Lifestyle Congruence: There is what you would need to sell to experience the “sweet life”, there is the break-even Lifestyle Congruence goal, which is about breaking even and living sustainably but not having the ability to enjoy the sweet life. Last, there is the bare bones Lifestyle Congruence number. For the bare bones number, you have to know how much you need to sell to keep the business alive and operational and leave yourself with only a minimum standard of living, as low as you can go without going negative.
There is HOPE!
Spending time in pursuit of these three goals will make your business more “figure-out-able” and thus, allow you to set reasonable and feasible goals for your business for the year ahead. As a result of putting these stepping stones in place in your business, you are setting your biz up for future sustainability and, eventually even financial prosperity. Do not forget to examine our second article this month about the Federal Stimulus Package. The offerings in this stimulus package gives me hope that more small businesses will be able to sustain their businesses through the remainder of the pandemic, as the government is providing us an important lifeline to potentially get away from bare bones business to sustainability and eventually, the sweet life. This gives me HOPE, and I can only wish the same for you. With preparedness comes peace of mind and with peace of mind comes hope for a better tomorrow. Everything actually IS “figure-out-able” and overcoming adversity is at the very heart of hope and sustainability.
