Are you saving a nest egg?
When was the last time you invested in yourself instead of your company? Many entrepreneurs pour all their time and energy into their businesses. This singular focus can sometimes make the difference between business success and failure. In addition, it can mean that other parts of your life take a back seat--including your personal finances.
Therefore, it is vital to take the time to examine your personal dreams and to determine whether you’re on track to achieving these goals. For example, do you have enough money set aside to provide for your children’s education? What about a more comfortable home and/or a better car? And, what does your life in retirement look like? Ask yourself, "Will I have enough saved to retire?" A quick way to check this out by using a retirement calculator.
Consequently, an important question to ask ‘How do I develop and execute an effective plan to meet both my personal and business goals’. This can be achieved by working with trusted advisors. A qualified financial advisor can help you determine how close you are to achieving your goals and choose the best strategy for reaching them.
So, do you have a personal financial advisor? What do you look for in an advisor to help you balance your business and personal goals?
Is Canada a good place to do business?
Congratulations—you’re running a business in the one of the best countries in the world for entrepreneurs. Rankings released this fall by the U.S. government’s Small Business Administration agency name Canada as the second-best country in the world for doing business. (In case you’re wondering, Denmark was first, and the U.S. was third.)
The report ranked Canada highly for its entrepreneurial attitudes and activity, including a lack of fear of failure, cultural support for entrepreneurship, and the quality of our human resources.
Canada ranked less well on entrepreneurial aspirations, such as developing new technology, introducing new products and services, and financing the business with venture capital. In other words, we’ve got lots of spirit and great people, but not necessarily the tools or drive to take our businesses to the next level.
So that’s what’s been your experience? Is Canada a great place to run a small business, or have you encountered roadblocks on your route to success?
Is your business a marketable asset?
Your Business Stage
Your business is valuable to you, but is it a marketable asset? Not necessarily. According to John Warrillow, author of Built to Sell: Turn your business into one you can sell, only 1% of businesses in Canada are sellable.
If you’re thinking about selling your business, ask yourself these three questions:
1. Is your business teachable? Think about processes that you can train others to deliver as well as you do yourself.
2. Is your business valuable? A buyer will want to know that your business is profitable, has growth potential, and has many loyal customers.
3. Is your business repeatable? Your business will be worth more if you show buyers they can build a future stream of income through expanding.
What steps are you taking to make your business more marketable to buyers?
How big do you want to grow your business?
Some people think bigger is always better, but not everyone wants the pressure of running a large company. You probably started your business to achieve a variety of other personal goals, such as being your own boss, work-life balance, a good income, and doing what you love.
Reassessing your goals can help you decide how big you want your business to be. Think about how much more work would be involved, how much more money you could make, and whether you can grow your business while still specializing in what you do best.
Now tell us: How big do you want to grow your business, and why?
Invest in your staff with training
There’s some good news on the employment front: according to Statistics Canada, overall employment increased 2.1% between September 2009 and September 2010, which makes up for the job losses during the recession. And while part-time work has made up a disproportionate share of those job gains, in September full-time jobs increased while part-time jobs declined.
For small businesses, these gains signal that the economy is on the upswing. However, it also means there’s more competition for good employees. If you’re looking to grow your business but can’t find workers with the right education and experience, one option is to train your current employees to upgrade their skills.
To ensure the best return on your investment in training, you need to do two things: concentrate on the right skills and train the right employees.
The best skills for your business are the ones that will give you a competitive edge. Focus on core competencies for your business: build skills that your employees will use regularly to do high-quality work. Choose training programs carefully. Do other employers or former students recommend the program? This will help you to determine if the training provides value for the money.
The best employees for training are the ones who have both an aptitude for learning and a commitment to your company. Here’s where small businesses have an advantage, since you know your employees better than a large business ever could. Identify your employees who are performing very well in their current jobs and who are looking for a new challenge. Think twice before investing in training for dissatisfied employees. While it may improve their job satisfaction, they could also walk out the door and take those expensive skills to a new employer.
Consider sharing the cost of the training with your employees, or offer to pay the full cost on completion of the training. This will help identify your rising stars. And to help retain both the skills and the staff, be sure to recognize the increased value of your employees to your business through raises or other compensation.
Have you used outside training for your employees? Tell us if it was worth it to your business.
Creating a long-term growth strategy
If you’re not ramping up to grow your business, you’re a bit behind—economic figures show that Canadian businesses have moved well past the cost cutting of the 2009 recession and are focused on growth. Businesses are investing in machinery and equipment, and job numbers have bounced back to pre-recession levels.
If you’re still deciding where to take your business, creating a long-term growth strategy can help you take advantage of opportunities now and in the coming years.
The first step is identifying your goals for growth. Will your focus be on growing your revenue? Expanding into new markets or developing new products or services? Increasing the value of your business? Remember: effective goals should be SMART—specific, measurable, attainable, relevant and time measured—and have the necessary direction to give them momentum.
Once you’ve identified your goals, start gathering the information you need to achieve them. Find out who your customers are and what they want from you. Study how your competitors have fared through the recession. Educate yourself about where your business sector is headed in the next few years. Information will come from many sources: your customers, expert advisors and mentors, industry publications and economic indicators.
Your research may identify multiple opportunities for growing your business. Do you have the resources—skills, staff, production facilities, sales, marketing, financing—to pursue them? Analyze each opportunity and narrow your list down to the few that are both attainable and offer the best growth potential.
Once you’ve identified the growth opportunities you want to pursue, use your research to plan your growth quarter by quarter. Schedule your business investments to ensure you have the required resources in place when you need them, like financing, or equipment and production space. Establish success benchmarks to track your progress, and be prepared to adjust both your growth targets and efforts.
A successful growth strategy is an ongoing process. Consult your team of expert advisors to help you make the best decisions for growing your business.
Are you creating a business growth strategy? What are your biggest challenges?
The Pros and Cons of Being an Entrepreneur
Being a small business owner can be very rewarding. But it is also a lot of work, and for every benefit there is a downside. Here are some thoughts on what it’s like to be a small business owner.
Pro: You’re your own boss
As a small business owner, you get to set your own schedule. There is no one checking if you’re five minutes late or if leave early on Friday. The only person you have to answer to is yourself.
Con: Work longer hours
According to Statistics Canada, in 2009 self-employed people worked on average 40.1 hours per week, compared to 35.2 hours per week on average for employees. And almost a third of the self-employed work more than 50 hours per week.
Pro: Choose the jobs you want
By having control over the jobs you take, you can choose work that makes the most of your own strengths and skills. The result is more job satisfaction.
Being a small business owner comes with lots off government paperwork. Handling taxes and employment-related reporting can take up time and energy that you’d rather give to your core business.
Pro: Keep all the money you make
Unlike most employees, who apart from the occasional bonus make the same amount whether their employer does well or not, your income is directly related to how hard you work and the success of your business.
Con: No dependable salary
You have to pay your employees and bills before yourself. If business slows down, or if your customers don’t pay you on time, then your personal income can be at risk.
Pro: Sense of Achievement
Whether you measure your success by revenue, profit, market share or customer satisfaction, as an entrepreneur you can easily tell if your hard work is paying off.
Entrepreneurs invest their time, money and hearts in their business, so when it is doing poorly it can be a major blow both financially and emotionally.
Tell us what you think about being a small business owner. What are your biggest challenges and rewards?
Finding and Training Your Successor
Your Business Stage
If you are considering retiring from your business, the choices you make now will affect the financial security for yourself, your family and your employees. In addition to growing the transferable value of your business, setting a timeline for retiring, and ensuring your post-retirement income, a key step in successor planning is finding the right successor for your business. Here are some guidelines.
Why your successor matters
If you plan to maintain partial ownership in your company, then you will want a successor who will help it grow and generate profit for you so you can concentrate on other areas of your life. However, even if you sell it completely, your legacy may also be of value to you.
Keeping it in the family
Many small business owners dream of passing their business on to their children. This helps maintain their legacy, and provides work to the people they care about. For similar reasons, you may want to groom one of your employees to take over. If you choose this route, be sure that your successor has the skills, experience and drive to build the business.
Finding a buyer
If you are focused on running your business and building its value, it can be difficult finding the time and energy to search out the best buyer. Here are some options: network with your local business community to identify young entrepreneurs in your field, place ads in industry publications (print and online) or hire a broker to source potential buyers. Review each potential buyer to see if they have the financial resources, experience and business plan to succeed.
The transition period
While you may have the option to sell your business outright and immediately transfer ownership and control, there are advantages to a more gradual transition. For one, your successor will have your experience as a resource while learning the job. And two, your employees, suppliers and customers will be able to gradually gain confidence in the new boss.
Are you going to retire in the next few years? If so, how do you plan to find your successor?
The Great Canadian Mentoring Challenge 2010
Think you know what to takes to make it in business? To mark Global Entrepreneur Week (November 15-21, 2010), the Great Canadian Mentoring Challenge invites entrepreneurs to share their insights with those just starting out in business. The challenge, cosponsored by the Canada Youth Business Foundation, gives you the opportunity to share your advice on Marketing & Social Media, Business Planning & Strategy, Funding & Cash Flow, and Entrepreneur Skills Development. Add your suggestions, or just read what everyone else is saying to learn something new yourself.
Deciding How to Reinvest Your Profits
Financial Know How
Reinvesting your profits in your business is usually a lucrative move. This will help you to qualify for financing, and may also be able to negotiate better terms on existing loans. If you’re looking to expand, a sluggish economy actually works in your favour: now is a great time to lock in low prices from both existing and new suppliers.
Where exactly to put your excess cash for the greatest bank for your buck? Consider what your key goals are, and then work backwards to determine the best way to reinvest your profits.
Free up time: Managing and growing a business can only happen if you can plan for the future. If you’re currently too busy for that, put your profits to work by hiring new employees. You’ll not only buy yourself time, but the ability to step back from the day-to-day operations. This will give you the opportunity and the perspective to look down the road at where you want to take your business, develop ideas on just how to get there, and put them into action.
Reduce debt: It’s always wise to have sufficient cash flow to meet your monthly bills. Extra cash will help you handle emergencies and spare you stress and financing charges. Beyond that, rather than sitting on a flush bank account, consider paying down debt. You’ll get a good – and guaranteed – return. Suppose you have a $15,000 loan at 7%. Pay it off and you’ll save $1,050 in interest costs a year. And that means a $1,050 freed up cash flow moving forward (which could offset the tax savings from deducting the interest payments.)
Increase productivity: Cash can be the key to unlocking efficiencies. Upgrade or replace an undependable piece of machinery and you’ll cut down on maintenance, reduce unexpected downtime, and increase quality. Hiring extra employees can reduce overtime charges, and boost the efficiency of your current workforce by allowing them to focus their efforts on their strengths.
Boost sales: If your competitors are still struggling with the fallout from the recession, now may be a good time to grab more market share. Invest in revising and updating marketing materials, making your website more user-friendly, or develop an outreach program. They’re all ways to turn excess cash into increased sales.
Putting profits back into your business? Where do you think you'll see the best returns coming from and why?