5 Key Principles of Small Business Management
As explained in the first part, it may seem excessively simplistic to do so, but the principles of getting control over the day to day
management of the business can be distilled in 5 simple principles which are in order:
* – Get Serious
* – Balance the Load
* – Tool Up for the Job
* – Focus your Activities
* – Outsource (what you can)
Part 1 covered the first two of these principles, the following sections examine the remaining three in more depth. 3 – Tool Up for the Job
This will seem to be self evident, but is often neglected in some pretty critical ways – usually for perceived cost saving reasons.
The question to ask is: “is not spending this money, actually costing me money?”.
A classic example is the computer and the excuse of “I have a computer already so I don’t need to buy one”. The mistake often made is one of using an older machine loaded with family photographs, instant messaging software, poorly protected and loaded with viruses.
This situation will just eat fee earning time and is an accident waiting to happen – especially if your business based backups are not 100% and the hard drive fails.
Better to start with a dedicated machine with up-to-date software and a solid backup solution (can be just a portable external drive) that you use consistently. Additionally this machine should be used for nothing other than business purposes.
This is of course part of the getting serious mind set and if you are working at home – put the machine in a separate room with a separate phone, desk, fax, filing cabinet etc.
Of course there is more to delivering a service than computers, but the principle of not working around your equipment is the
key. If you are spending time waiting for the equipment to do something, you should evaluate exactly what this lost time is costing you. This time is called Opportunity Cost and it can be simply calculated as follows:
(Hourly Charge out Rate) X (Lost hours waiting / working around equipment)
If you do this calculation for one week’s worth of waiting or working round time, you may well realise that not spending
one or two hundred pounds could be costing you thousands.
A further error could be not investing in management and administration software such as such as ProQuin (see: http://www. ProQuin. co. uk). Software like this will not only put control into the business, but save you hours of administrative time. 4 – Focus your Activities
In part 1 I mentioned the need to fit in sales activities into the working week and one of these could be a networking event. You will quickly learn (I hope) that there are networking events and there are networking events.
Some events are well organised and highly focussed on ensuring attendees are doing business with each other, but many are cynically put together and a successful outcome from attendance can be a lottery. Remember, it is more likely that people will be attending a networking event to sell rather than buy. Therefore, you will often find yourself in conversations where the other person is much more focussed on telling you about their offering rather than listening to you about yours.
Networking events can eat time. If you are not careful about which ones you attend and how you use them you can lose hours of valuable time each week for little or no benefit.
Like the issue with tooling up correctly you always need to calculate the opportunity cost of networking, meetings and follow up activities.
Focussing your activities in this regard means focussing on the money. Whether this be networking, sales presentations, joint ventures, training courses, information seminars, expert consultations or whatever, if you cannot see a direct link to short to medium term earnings it is likely that, as a small business person, you should not be involved. 5 – Outsource (what you can)
The last, but not least, principle in terms of getting control over your small business is to outsource whenever possible. This means in all areas, i. e. : delivery, administration and sales. The reason why you need to consider this is that outsourcing can extend both your personal time and the reach of the business overall. It will give you the time to work on the business instead just working in the business.
It is counter intuitive to say so, but outsourcing service delivery can make sense – especially on start up. If you can find individuals who will price work at 75% or below of your normal selling price, then outsourcing can make sense, leaving you free to
concentrate on a greater percentage of sales work in your weekly schedule while still effectively earning. This will allow you to develop a sales pipe line and decide how much work you will do and how much you will farm out.
Administration outsourcing is more widely accepted with outsourcing for things like accountancy more being readily and widely taken on board.
Sales is by far the hardest things to outsource. There are plenty of companies and individuals out there claiming to do this, but it is always a huge risk, especially if you have any intellectual property to protect. Be prepared to give a large percentage of the sale in commissions – especially if using freelance sales agents. Conclusion
Although by no means the full story, the above 5 principles of small business administration, management and control provide a solid basis to get started and make your business grow.
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