5 Business Practices that Every Business Owner Should Know
Peter Thelen Sr. CPA
Two roads diverged in a wood, and I—
I took the one less traveled by,
And that has made all the difference.
Starting your own business can be an exciting new beginning and a very important life decision that might not always be rational. But just because you've made the transition from employee to business owner, doesn't mean it's all smooth sailing ahead. Your business is bound to give you many sleepless nights, demanding all your attention and testing your resolve at every stage. Perseverance is the first quality any business owner needs to develop and maintain if they want to survive the early years. Building a solid foundation of robust, tried and tested business practices is what is required to take your business from a mere start-up to a flourishing empire.
Ask any expert business planning consultant and they'll tell you that, no two businesses are alike, and that there's no one-size-fits-all solution to success. But, even though there is no definitive guide, there are certainly established business practices that are essential for any business owner, no matter what industry they're in or what stage their business is at.
The biggest mistake that entrepreneurs can make is charging ahead without proper planning and research. But taking some of these essential business practices into account will greatly improve success.
In order to succeed in business, you need to offer a product or service that is valuable to your target market. This means having a clear understanding of what your customers want or need, and being able to provide it to them at a price they're willing to pay. Let's face it, we all think our idea is special - but what is needed most is a brutally honest assessment of what the ideas bring to the table. To assess the value proposition of your product or service, ask yourself the following questions:
· What problem does my product or service solve?
· Who is my target market?
· What are the unique selling points of my product or service?
· How much are my customers willing to pay for my product or service?
If you can answer these questions with confidence, then you're on the right track. If not, then it's time to go back to the drawing board. Once you have a clear understanding of your product's value proposition, you can refine your offering and start to develop marketing and sales strategies that will help you to reach your target market and convert them into paying customers.
Gauge the Market and Your Competitors
Knowing your product or service inside out is important but, in order to be truly successful, you need to have a clear understanding of your industry and the competitive landscape. This means being aware of the latest trends, as well as the major players in your field. A competitor analysis will help you to understand what your competitors are doing right (and wrong), and how you can position your business to win in the market.
This knowledge is indispensable for a business owner and one of the most important business practices in your toolkit. It serves as a crucial decision-making factor in charting the growth route of a business and helps in identifying opportunities as well as potential threats. Research is key. You wouldn't send your child to a school without first investigating its educational methods and facilities. The same goes for businesses. Before you commit to a particular market, industry, sales method, or price point, make sure you understand as much as you can about the arena.
Carrying out market and competitor research is not a once-off exercise - it's an ongoing process that should be revisited on a regular basis. The business landscape is constantly changing, and you need to make sure that you're keeping up with the latest trends. This will help you to ensure that you're always one step ahead of the competition and consistently meeting the needs of your target market.
Once you have identified your target markets, and fully researched your competition and competing products or services you are ready to complete a thorough SWOT analysis of your product. This can also be helpful in identifying key strengths and weaknesses, and how they can be overcome. There is no use in doing a SWOT analysis without following up with an action plan and implementing the necessary changes to your product or your business model so that you can start seeing tangible results.
A successful business owner always monitors the value of their business. In a start-up, gaining an understanding of the value drivers in your particular business will help guide your key foundational decisions. Once you are established, knowing your business's value plays a fundamental role in making future strategic decisions and financial planning, especially when matters such as the sale of your business or an insurance evaluation are at hand. The good news is that obtaining a valuation of your business has never been easier. The business valuation process should highlight several key metrics for your business and industry and show you how you rank against the average performers.
Using a baseline valuation to chart your course or obtaining a valuation for financing or investment purposes is always better than just guessing where you are or where you are heading. Having a professional valuation also gives you an edge when it comes to negotiating with potential buyers or investors.
But if you are not looking to sell yet, why would you need a valuation? While this is one of the most important business practices for any business owner, it is often overlooked due to the misconception that a valuation is only important when you are looking to sell your business. However, this could not be further from the truth. There are many reasons to get a valuation even if you're not planning to sell. A valuation can help you:
· Make informed strategic decisions
· Secure financing
· Maximize shareholder value
No matter what stage you're at in your business journey, it's never too early (or too late) to get a professional valuation.
Just like any relationship, the most successful businesses are built on trust. In order to gain and maintain the trust of your employees, customers and shareholders, it's important to be transparent in all your business dealings. This means being open about your company's finances, sharing information about your products and services, and being honest about your successes and failures.
Make sure to keep a record of all financial transactions undertaken by and for the business. In an environment where fraud and lawsuits are rampant, being transparent will add credibility to your business, and create a favorable perception in your customers' minds.
Today, collecting, storing, and analyzing data is the lifeblood of every business. The insights gleaned can be used to make better decisions about everything from product development and marketing to sales and operations. However, with great power comes great responsibility. As a business owner, it's your job to ensure that the data you collect is used ethically and responsibly. This means protecting the privacy of your customers and employees, and using data only for its intended purpose.
The bottom line is that maintaining the transparency of your business ultimately leads to a gradual increase in equity. A lack of transparency can quickly lead to a loss in trust, and we all know that once that trust is gone, it's very difficult to get it back.
Set Realistic Expectations
In the business world, setting and managing realistic expectations is vital to success. This means having a clear understanding of your limitations, as well as the potential of your business. It's important to be honest with yourself and those around you about what you can and cannot achieve. Over-promising and under-delivering is a recipe for disaster, and will only lead to disappointment and frustration.
It's also important to set realistic expectations for your employees and give them the resources and support they need to meet those expectations. When setting goals, be sure to break them down into small, manageable steps that you can actually achieve. It’s essential to take as much as you can handle, and no more. If not, you might end up compromising the quality of your product or service, and this can have a detrimental effect on the credibility of your business.
Our Final Thoughts
When you launch a new business, you're taking on a lot of responsibility. Not only do you have to worry about the bottom line, but you also have to think about the wellbeing of your employees, your customers, and your shareholders. It's a lot to take on, but it's important to remember that there are plenty of resources available to help you navigate the challenges of starting and running a business. Seek out advice from those who have gone before you, and learn as much as you can about what it takes to be successful. Use this knowledge to build a foundation of trust, transparency, and realism in your business, and you'll be well on your way to achieving success.
One of the most important steps you can take, whether you're in a pre-launch stage or you have an established business, is working with a team of financial advisors and business planners to create a detailed business plan that will serve as your roadmap to success. Your business practices will lay the foundation of this plan and guide your decisions as you progress.
If you're looking to go from surviving to thriving or you're wanting to set your business up for success from the outset, contact Thelen Financial today and we'll help you formulate a detailed business plan that will ensure you're set up to achieve your most ambitious business goals.
About the Author
Peter Thelen, a licensed CPA, has served at the top of operating service companies and brings significant operational and financial experience to the partnership. As fractional CFO and COO consultants, we can provide the financial and operational support you need to get your business to the next level.