Crafting A Business You’ll Love

Being in business for yourself is tough…I don’t know how else to say it. I know…I’ve done it. You wake up at night worrying about the business, worrying about money, worrying about how to handle all of the things that come at you day after day. As a business owner you have people who are depending on you to make the right decisions day in and day out and I would guess that there are a lot of you who probably didn’t get into business with this in mind.

Having a job and having aa business are two entirely different things. The business you started because you loved to do something has taken on a life of its own and now it owns you. This wasn’t what you dreamed of when you started out. You dreamed of being your own boss, being able to do what you wanted, being in control, but little by little the business took over and now you find yourself working harder than ever and doing things that you never envisioned or wanted to do, and you finally have to admit, if you’re being honest with yourself, that you don’t love your business.

Now, if you are one of those people who honestly can say they love their business, I would encourage you to keep reading. There could very well be some things that you could do to make your business more lovable than ever. If you are not in love with your business, then keep reading to see how you can start to change your business for the better.

What this isn’t.

It isn’t a quick solution. You didn’t get this way overnight, and you can’t expect to make it better overnight.

What this is.

  • It is a synthesis of knowledge taken from other sources (my Dad always said learn from the mistakes of others because you will never live long enough to make them all yourself)
  • Lessons learned from being in business myself
  • Lessons learned from working with other companies as a consultant
  • The start of a guide or roadmap if you will, of how to start positive change in your company to make it better.

At its finest, a business should be a turnkey operation that performs in a predictable manner day in and day out, producing the kind of revenue it needs to present ownership with the profits and benefits desired. Ideally, as a turnkey operation, it should function without you needing to be there and without you needing to work as an employee of the company. If you got into business just to provide yourself with a job, then you are not going to be happy for very long. Why? It’s because a business takes more than just you working at a job to be successful. It takes someone running the business…someone working on the business, not just in the business.

 

The top down approach to business planning or budgeting

Most people will start the business planning or budgeting process with determining what their projected sales will be, or should be. This top down approach next looks at what the cost of creating those sales is in labor, materials or some combination of those two. That yields gross profits which goes to pay for all of the things you need to run the business like utilities, office supplies, fuel and lots of other things. What’s left over is net profit before taxes. Depending on how your business was incorporated you have to pay the taxes on those profits and what’s left over is yours. That is…if there is anything left over.

 

Step one – A different way of thinking

I would like to suggest that whether you are starting a new business, or re-crafting an existing business; creating something you love requires that you take a different approach. This is something that is called a bottom up plan. To honestly create, or recreate, a business that you love you need to start by asking yourself what you want out of the business. You need to start the process by defining the profits and benefits that you would like the company to provide for you and your employees. For instance, you know that you need a salary. You want some profits too. Maybe you need some sort of benefit or retirement plan; maybe you want to take four weeks of vacation every year or only work four days a week or not work any weekends…you get the idea. Now take your list and define what these things cost before you do anything else. That is your bottom line…the amount of money your business has to generate to give you what you want from a business that you love.

So knowing what you want from your business in terms of dollars and cents, you need to start building up. Add the overhead for your business on to the bottom line figure you created above. Next add in any labor costs. Make sure to include yourself if you haven’t already. This gives you the gross profits needed from sales activity. At this point you can calculate how much you need to do in sales to get you desired result by using your cost of sales data. Let me give you a simple example:

  1. Bottom Line – $100 annually
  2. Overhead – $200 annually
  3. Labor – $500 annually
  4. Gross Profits equals A+B+C – $800 annually
  5. Historical percentage of gross profits to net sales = 67%
  6. Sales Goal = Gross profits divided by the historical percentage of gross profits to net sales so in this case $800/67% = 1194.03 in net sales annually.

Let’s test this in reverse –

  1. Net sales – $1194.03
  2. Minus COGS (33%) – $394.03
  3. = Gross Profits(A minus B) $800
  4. Minus Labor – $500
  5. Minus Overhead – $200
  6. = Net Profit $100

The bottom up planning process, starting out with an honest assessment what you want out of the business, gives us the information to generate the sales needed to make the dream come true. So now the question that you have to answer is this –

  • In real life, with real numbers, in your business, is the sales figure you came up with realistic?
  • What do you need to do to make it realistic?
  • Is it competitive in your market?
  • Can you make those sales happen through a combination of pricing strategy and marketing?
  • Do you know how a new pricing and/or marketing strategy will impact your bottom line?
  • Do you even have a pricing and marketing strategy?

For answers to these and many other questions that we know come up in the pursuit of a business you love – contact us today.

 

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