Step Five: Insure Success
Set goals and benchmarks.
A goal is where you want to get eventually. A benchmark is like a mini goal—the steps you know you can hit along the way that will help you eventually reach the big cheese. Both are equally important. You need a way to measure your own success.
Keep a handle on the numbers.
If you don't have a handle on the numbers, profits and pricing, you're kind of going on a wing and a prayer. You're floating wherever the wind takes you, but when you get real clear about the numbers side, everything else falls into place. Entrepreneurs think that if they just have a good product or service, the numbers will take care of themselves. By and large, those are the businesses that tend to fail. So many small businesses in the graveyard had good products and services, but they never had a handle on what would constitutes profitability. If it's worth doing, it's worth tracking.
Review numbers and benchmarks every 30 days.
The other mistake is people look at numbers once a year or once a quarter. Entrepreneurs and small business owners need to have critical numbers and benchmarks, and they should be measuring those on a 30-day basis—quarterly reports are way too long. You have to know what your fixed costs are, and make sure you know that you're pricing products and services correctly. Many people don't know, so they charge what they think is right. In most cases they are way too low, and then it takes way too long to reach profitability. You have to do a combo of looking at competitors and your own fixed and variable costs.
From an owner's compensation perspective, they tend to take too little, too long or too much too soon. They either sacrifice themselves in hopes of some pot at the end of rainbow (and work around the clock for little or nothing and burn out), or they drain the business of cash. For example, a corporate executive who's used to earning $100,000 year will start a business and want to replace that income. She'll start sucking money out of the business prematurely and never have enough to reinvest back in during the early stages. The key is finding the right target point of compensation, find a blend between not killing yourself and not overpaying yourself either. Reach out to a small business adviser to get an idea of what your salary should be.
There is a real reluctance to reach out for help, and people sometimes wait too long until there is a crisis. The sooner you can surround yourself with the right team and really take a team approach, the better off you'll be. Get the right legal framework and accounting framework in place. People consider that an expense, when in fact, during the early days, it's really an investment.
Monitor your progress.
You have to make sure you're surrounded with the right teammates who can help you monitor your progress. If you grow too fast, you'll grow yourself right out of business. If you grow very slowly, you run the risk of becoming stagnant. You have to make sure you have a consistent market and sales plan in place and watch the numbers and profitability on a regular basis to know when and where to reinvest. Entrepreneurs and small business owners are usually not savvy enough to know when to do that themselves.
Need some motivation? See how one woman turned a cocktail party into a million-dollar business.