FIVE STEPS TO SMALL BUSINESS SUCCESS Paul Choy **** Published by: Paul Choy at Smashwords Copyright (c) 2012 by Paul Choy **** All rights reserved. Without limiting the rights under copyright reserved above, no part of this publication may be reproduced, stored in or introduced into a retrieval system, or transmitted, in any form, or by any means (electronic, mechanical, photocopying, recording, or otherwise) without the prior written permission of both the copyright owner and the above publisher of this book. Smashwords Edition Licence Notes This ebook is licensed for your personal enjoyment only. This ebook may not be re-sold or given away to other people. If you would like to share this book with another person, please purchase an additional copy for each person you share it with. If you’re reading this book and did not purchase it, or it was not purchased for your use only, then please return to Smashwords.com and purchase your own copy. About Snap Books Thank you for downloading this Snap Book. Snap Books are short and concise books across a range of subjects. They get straight to the point, and tell you only the things you need to know. You are viewing an eBook version of this Snap Book designed for on all major eBook readers. This book is also available, as a free download, in PDF format suitable for reading on a desktop computer, smartphone, or tablet. To download this Snap Book in an alternative format, please visit www.paulchoy.com. Five Steps To Small Business Success Version 1.0 By Paul Choy Copyright (c) 2012 Pachworks Copy Editor: Heidi Stephens - www.heidistephens.co.uk Graphic Design: Catherine Giaquinto - www.catherinegiaquinto.co.uk Note: Whilst every effort has been made to ensure that the content of this book is technically accurate and as sound as possible, neither the author nor the publisher can accept responsibility for any injury or loss sustained as a result of use of this material. Contents Introduction Step One: Manage the Money Step Two: Manage the People Step Three: Managing The Decisions Step Four: Manage the Communication Step Five: Managing Yourself And Finally For my father, France, who taught me everything I know about business. About The Author For many years of my life, I had one single focus: achievement. Whether that achievement was in business, running an International Investment company for many years; or in sport, winning four World Karate Championships, while coaching thousands of people to fitness success. But, in 2010, feeling I had lost sight of what really mattered in life, I decided to simplify my life and and broaden my horizons. I moved from the UK to the beautiful island of Mauritius in the Indian Ocean. Today, I lead a quiet life. I spend time with my family. I walk on the whitest sands and surf and dive in the bluest waters. And I enjoy creative pursuits like writing stories like this. I actively encourage questions or feedback and would love to hear your thoughts, so feel free to get in touch at www.paulchoy.com. Introduction So here’s the thing. Running a small business is not difficult. It’s not even a little bit difficult. In fact, I would go so far as to say that running a small business is easy if you follow these five essential steps to small business success. Which of course begs the question of why so many perfectly good small businesses fail. Honestly? It’s because businesses are run by people, and people have a tendency to mess up. Let’s start by making some assumptions. Firstly, let's assume that you are either the owner of, or have the responsibility for, a small business, or are thinking about starting one up. Otherwise, why are you reading this book? Haven’t you got anything better to do? Next, let’s assume you have the skills required for that small business. So, if you run a sewing machine repair shop, I’m going to assume you actually know how to repair sewing machines. Sound reasonable? Good. Finally, let’s assume you have customers willing to pay you. Woah, stop right there. Not what you were expecting? OK. Let’s get something out of the way right from the very start. This book will not tell you how you get customers to buy your products or services. That’s up to you. It’s not like the world is short of books on sales and marketing, is it? In addition, this book will not tell you how you do your job. If you do indeed run a company that repairs sewing machines, it is up to you to learn how sewing machines work. What this book absolutely will tell you is how to make sure that, assuming you have customers and you have the ability to do the job, you don’t screw up by failing to run your small business properly. A common misconception seems to be that most small businesses fail because they just can’t sell enough of whatever product or service they offer. But in my experience (which covers 20 years of advising small businesses, since you ask) an awful lot of them had a perfectly healthy number of customers. They just failed at the basics of running a business. Some messed up their cash flow forecasts and simply ran out of money. Others messed up their delivery and lost the customers they had. One of the main differences between small businesses and larger corporations is that small business operators have to be a jack of all trades. Large businesses will have people who specialise - someone who’s an expert in accounts or HR, or a specialist in quality assurance. Small businesses operators will have to deal with all this and plenty more, and for many this means making it up as they go along. It doesn’t matter how much training and experience the small business owner has in their particular sector, chances are he or she has never been taught how to actually run a business. The operator of the sewing machine repair shop might be able to dismantle a sewing machine and rebuild it in a matter of minutes, but can he or she reconcile his business bank account or plan a staff roster? Disciplined business management is absolutely fundamental to a successful small business. Without it that business will always be living on the knife edge between success and failure, even though you may not be aware of it. The good news is that running a disciplined small business is really not difficult, especially if you follow the five steps that I am going to outline in this book. Why should I read this book? That’s a fair question? Any quick internet search will find a library full of “How to run your business” type books. So what makes this one any different? Well, for starters this book is specifically about operating a small business. If you work with a larger business there will still be plenty here that’s of relevance to you. But this book talks more directly to the small business operator who will almost certainly be able to relate to most, if not all, of the issues I cover within this book. By “small business”, I’m talking about organisations with an annual turnover of less than £2m, and less than 50 employees, although it equally applies to a business with 2 employees turning over £50k. Also, you haven’t bought this book. I have given it to you. I have done this gladly because I truly believe the information in this book belongs to everyone, and should be freely available to you and every small business operator. But there’s another thing. By giving this book away without charge, I have freed myself from the burden of having to tempt you to buy this knowledge from me. Most of the books you’ll find on how to run your business expect you to pay for them, so they make you promises to justify your investment. Like “I can help you turn your business around without you having to do any work” (they can’t). Or “I can help understand what goes through the minds of your customer” (they definitely can’t). Because no cash has exchanged hands, I can be honest with you. Brutally honest sometimes, bordering on downright rude. And being in business often requires brutal honesty. The information I present you with in this book will sometimes be uncomfortable to read. It will often be challenging to implement. But the five steps I outline here are absolutely essential in achieving sustained success of a small business. So, why should you listen to me? Because I know what I’m talking about. I’ve been successfully running small businesses for over two decades, and these small business have collectively become a much larger business with a multi-million pound turnover, employing staff halfway around the globe. Over the course of these two decades, I have learned an awful lot about running a small business. And I’ve also made some whopping mistakes, which I can now help you to avoid. As well as running my own business, for many years I have been helping small businesses all around the world deal with challenges they face. Working with these companies has shown me something really striking - I see exactly the same mistakes being made by all sorts of small businesses, no matter what country or language spoken. These mistakes are human ones, not related to culture or business climate. Running a business is the same all around the world. I am not an accountant. I have no business qualifications. I’m not even sure I would make a very good employee in someone else’s company. But what I’m sharing with you in this book are the grassroots lessons I have learned through building small businesses around the world. Mostly you should listen to me because I will tell you exactly what you need to know, without any sugar coating, ego-stroking or jargon-laden fluff. Opening your mind Here is my challenge to you. If I commit to telling you what you really need to know about running a small business, are you truly ready to open your mind to listen? Without exception, the biggest hurdle I encounter in helping small business operators to secure their long term business is overcoming the blinkered views of the operators themselves. They ask for help, but don’t actually want to make any changes to what they currently do. In this book I am going to share with you the five steps that I believe you need to follow to operate your small business. You may agree with me, or you may not. All I can tell you is that the advice I give in this book has worked for me, and for the many other small business operators I have helped over the years. Whether the information contained in this book can be made to work for you entirely depends on your willingness to take it to heart and apply it for yourself. That needs to be your commitment. So, are you ready to commit to your small business? Step One: Manage the Money In 2011 I was asked to provide assistance to a software development company that was just a few weeks away from going out of business. The company, which was founded by two incredibly motivated and talented people, had been running for nearly two years and had a healthy customer base. Despite this the company had ran into trouble. Their problem was that they had too many customers rather than too few. As a fairly new business, still afraid of losing any potential sales by delaying the start of new projects, they had agreed to an immediate start of virtually of every job they quoted for. So instead of having five projects that they could comfortably finish and invoice for, they found themselves struggling with ten half-finished jobs. And, although all the customers had all paid a deposit to start their projects, the balance for each job remained unpaid until they were finished. Worse still, the company had been regularly late in paying their staff over the previous few months and several had left the company as a result. Although the remaining staff team were committed to the company, they had made it clear that they would not continue to work if the salaries were late again. Without the staff the company would not be able to finish the current projects and would go out of business. When they contacted me for assistance they were just three weeks away from their next salary date and didn’t have enough cash in the business to make the payments. They had approached their bank for a temporary overdraft, but had been refused as they were unable to demonstrate they could provide enough security, even if that borrowing was only a short term overdraft. This was a completely avoidable situation which perfectly demonstrates the danger of financial mismanagement, specifically the lack of cash flow forecasting. This company had customers who wanted to buy their services. They had the ability to provide these services. They simply ran out of money to take these projects to the finish line and ensure they got paid. The solution was obviously to get cash, and fast. The advice I gave was to approach their current customers, offering them a discount on their project if they would make an immediate, interim payment for the work completed so far. The company wasn’t keen on offering a discount, but agreed there was no point being able to charge full price if you go out of business before you can collect. Of course there was a risk that their customers could become nervous that the company was struggling financially, but most companies have experienced their own cash flow pressures at one time or another, and will usually understand the need to raise money. Generally, however, the customers were responsive. They were happy with the progress of their projects so far, and enough of them took up the discount for the company to raise more than half the funds they needed to meet their immediate commitments. Armed with this cash injection, along with a simple but detailed cash flow forecast we prepared to demonstrate how the company could manage over the next three months, the company approached the bank again. This time the bank was more confident in the company, and provided [...]... at how little many small business operators know about the state of their own business They seem so caught up in the day -to- day activities of the business, they forget to take a step back now and then to look at where they are, and perhaps more importantly where they want to be But what if I told you that if you track just five numbers relating to your business you could use these to tell you virtually... They forget to leave those same staff alone, so they can get on with their job! Small business operators will interfere, take over, reallocate and generally undermine their new staff at almost every opportunity In short they will end up doing almost everything they can to stop them to do the job they were employed to do I have yet to meet a small business operator who didn’t think they were totally invaluable... action you decide to take Far too many small business operators merge these steps into one big mess that almost always ends in tears Their Future in Your Hands OK, so as a small business operator you find yourself in the position of having to decide whether one of your staff members has a professional future with your company In order to make your decision, you are going to need to gather as much information... your small company What are you going to do with them? The answer is simple train them Your number one responsibility with new staff is to give them the tools to do their job, and this means ensuring they are given all the knowledge that will allow them to succeed A lot of small business operators I have met are reluctant to spend too much time or money on training new staff in case those staff leave too... virtually everything you need to know about the strength of your small business? These are the five numbers that every small business should constantly be aware of, and I call them magic numbers They are: 1 Reporting Period 2 Projected Gross Income 3 Budget Expenditure 4 Non-Budget Expenditure 5 Profit Together we are going to explore how, with these five numbers, a small business operator can deduce almost... have managed without To successfully manage the finances of a small business, it is essential to learn how to to leave each box alone Otherwise you run the very serious risk of not having enough in each small box for when you need it Right, lecture over Let’s turn our attention to how we can use this information to make a financial plan for the future For that we are going to need our small boxes again... where most small businesses I work with need help, and here’s the reason why: Virtually all the income you receive from your customers has been spent before they even pay you It never fails to amaze me how many small business operators don’t realise this, that the money they just put into their pocket doesn’t belong to them And because the money is just sitting there, burning a small hole, those businesses... rule of business is, PROTECT YOUR PROFIT Sounds obvious, doesn’t it? And yet so many small business operators forget and end up allowing their business expenditure to eat into their profit, sometimes swallowing it completely I have lost count of how many business operators I have met who haven’t got a clue what their current level of profit is, seemingly happy to wait until the end of the year to discover... (appropriately) to other staff members You may even talk to customers You will turn over every stone to make sure you are fully informed Then, once you have all the information available to you, you will speak to the staff member and allow them to offer their point of view In many countries it is advisable, even required, for an employer to offer the staff member the opportunity to bring someone with them to be... principles in the day -to- day interaction with your staff, what next? It’s one thing establishing a solid general approach to managing the staff of a small business, it is quite another to actually put that approach into practice The good news is that the next steps are as easy as ABC Easy As ABC Unless utilised effectively, a staff team can easily become an expensive accessory to a small business Fortunately, . sustained success of a small business. So, why should you listen to me? Because I know what I’m talking about. I’ve been successfully running small businesses for over two decades, and these small business. a small business is not difficult. It’s not even a little bit difficult. In fact, I would go so far as to say that running a small business is easy if you follow these five essential steps to. lost the customers they had. One of the main differences between small businesses and larger corporations is that small business operators have to be a jack of all trades. Large businesses will