4 Ways To Ruin Your Small Business

The DIY Trap
Sit down and calculate how much money you in an hour when generating an income. Calculate how long it takes you to personally complete each job: clerical, bookkeeping, graphics art, web-management, promotion, etc..

Time is premium in the business world. It is not free. Each hour has a monetary value. DIY is a poor management option when the business owner wastes time doing tasks that can be outsourced, instead of generating revenue.

A business owner’s first priority should be generating revenue. Each task should be assigned a value depending on its relationship to the ‘revenue generation process.’

Good and Bad Debt
There are two types of debt. Bad debt includes borrowing money to pay operating expenses, salaries, or gambles. A good debt is one that generates income, increases profits, or acquires fixed assets. A good rule of thumb is to invest 20% of the business income into advertising. Then, keep debt lower than 30%.

Calculating Expenses
All business gurus tell a story of a retail outlet that invested so much in displays, they could not afford stock, or advertising. Calculating expenses should not be an exercise in determining how much money is needed to stay in business. It should determine how much money does it take to earn $1.00.

How much money is invested in generating an income? What is the profit margin? Will this sustain business growth? All of these questions need to be answered before the company starts hemorrhaging money and plummeting into a downward spiral.

I’ve asked a few struggling business owners to do the following experiment. Calculate how much of each dollar is devoted to generating expenses. Multiply this by the profit margin. Will the income cover future expenses and large asset purchases?

Are you investing enough money into ‘revenue generation’ tasks and projects to cover your business expenses? It is amazing how many times a struggling business has never calculated whether they are investing their money in the right places.

Paradigm of Business Success
A paradigm is a blueprint. It is something that is common among businesses that exceed. The goal is not always to ‘make more money.’ Using resources wisely is often the first step. All you may need is a little reorganization and prioritizing to turn your business into an unmitigated success.