When it comes to offering truly valuable advice to startups, the task of management can’t be brought up enough. While it’s helpful to zoom in and focus on key areas where management can be applied at the micro level of a business, those areas require an equally if not more competent central management team.
Whether an individual or a team comprises management, it’s essential for company leaders to establish actionable metrics by which to judge success or failure. For some businesses, certain metrics will matter more than others. Knowing how to find out the key areas of your business is one of the first big steps you can take towards getting your business working smoothly.
Think of your business in terms of its parts
A useful way to think about your company is to imagine it like a simple machine with inputs and outputs. As a manager, your task is to make sure right buttons are pressed when they should be while the others go idle. To keep the metaphor going, we all know how frustrating it can be when we’re forced to use a brand new technology without knowing how it works. Avid iPhone users are usually frustrated when they’re asked to operate a Windows phone when they have no prior experience and visa versa.
The point is, you need to understand your business through and through before you attempt to design a management system to keep its parts in good working order. The goal with every measurement decision is to make sure you can tell when the outputs are less productive than what you’re putting into it.
Putting communication first
Without a means to solve problems and recognize successes throughout your organization, it’s nearly impossible to envision a bright future for your business. All too often management teams pass the blame of their shortcomings onto the health of the market or other external circumstances they don’t have control over.
While downturns in the market should certainly be accounted for when evaluating yourself, throwing your hands in the air and hoping for better luck next time doesn’t pass for management. In order to get some real problem solving done, you’ll have to open the hood and have a look at all the parts of your business to find and isolate the problem. The systemic nature of problems within your business usually only reveal themselves once the management teams invests the energy in tracking the trail of breadcrumbs back to the original source.
By tracking comparatively poor earnings to poor sales, you may find that salesmen fell behind because they weren’t handed leads by the marketing team. By analyzing your marketing efforts over time, you may find that by downscaling your social media team, you’ve lost a significant amount of engagement which once accounted for a significant amount of your total leads volume.
Where a “band-aid solution” would have probably stopped at the sales team and resulted in restructuring a team that was actually doing everything right, you’ve not only let the actual problem go, but also hindered a part of the machine that was working well. It’s in these kinds of scenarios where poor management can gradually do more hard than good to both your business’ bottom line as well as employee morale.
Early points of focus management teams should pay close attention to
The best way to avoid the kinds of problems presented above is to designate standards by which to measure your business’ actions over time. While it may seem like a rudimentary lesson in business, it’s important to think of these concepts as they relate to one another rather than simply a list of things to check off each time you review your numbers.
In terms of meeting your most important goals early on, the three broad measurements to keep your eye on the most are your cash flow, profits/losses, and assessable growth. While every business obviously requires its own set of measurement parameters from which to judge success and failure, these are the elements of every business which should never be overlooked by your core management team.
If you’re a start-up owner and unsure of how to analyze these financial metrics or others, give us a call. Our outsourced accounting and CFO services experts can help you navigate these waters. Photo Credit: Biking Nikon SFO via Compfight cc
For many small business owners who are either new to entrepreneurship or struggling to adapt to some of today’s more innovative business technology, it’s easy to find yourself neglecting some very important financial practices essential to keeping your business on top of your competition in a fast-moving world.
Specifically for those who are newer than others when it comes to starting and maintaining a business, some tasks, which may appear to be of lesser relative importance to other responsibilities, can quickly start to hurt your business in some serious ways.
With that in mind, we’ve put together a list of some of the most commonly seen mistakes small businesses are making as a result of being overworked and undereducated about what matters most as you begin a business venture
Undercapitalizing early on
A major issue, which can plague an entrepreneur’s efforts before they even get off the ground, is having enough money to cover themselves in the short term. Raising initial capital can be extremely difficult unless a number of financial pieces fit together at the same time. While being optimistic about your business is certainly a necessary early motivator, over optimism often clouds new business owners to the reality of how well they can expect to do during the first year of business.
Relying on your business to be self-sufficient within a year not only demonstrates a lack of practical business chops, but also can potentially lead to financial disaster if lenders are unable to collect on their investments when they expect to. Starting with sufficient initial capital is essential for businesses that experience early turbulence.
To be confident you can avoid this problem, try to mitigate unrestrained optimism about your product or service and be as conservative as possible when projecting your business into the short-term future. If you’re new to business, value the advice of those who have been in your shoes and pulled themselves out of the dark and into long-lasting success. At the very least, make sure you’re well-aware of your initial expenses and gather at least double the capital you project yourself to need.
Insufficient accounting considerations
Tracking your finances is a task that never ends. For those trying to juggle everything at once, it’s often one of the first business metrics to fall by wayside only to be noticed when it’s too late to reverse a negative trend. For business owners, glancing at your bank statements is not enough.
Although you may be entering the market with a ridiculous amount of capital in the bank, turning a blind eye to your cash flow can turn a small stream into a waterfall of lost money.
If you’re too busy to keep track of your books as well as your need to, hiring a bookkeeper either in-house or outsourced just to run basic financial reports can go further than you think. Accounting is much more than number crunching and calculations––it’s what allows you to track your performance with incredible accuracy. Seeing where cash is spent and projecting your growth into the future are two of the most essential parts to keeping a small business afloat in a turbulent business environment.
Poor resource allocation
Capital is meant to be spent; the trick is to know what to spend it on so you can start generating real revenue. When it comes to doling out your initial investments, carefully weigh the cost-benefit of everything decision you’re making.
By being smart with your resources, you can easily stop yourself from overspending before it starts to unbalance your cash flow. Before making a considerable investment in an item or service you’re unsure about, ask yourself if you can live without it––you might be surprised how little you actually need.
If you’re looking for a reliable accounting or CFO service, contact our start-up accounting and CFO services experts.
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We’ve tried our hardest to offer solutions to a wide variety of money issues for all kinds of business owners through both our blog and our outreach to the local Madison startup community. If you’ve been following our advice each week, we hope this post should apply to you!
But regardless of how you might find yourself grinning proudly at your bank statements after starting your small business the right way, or making efficient changes when things went awry, exceeding your revenue expectations is a great feeling. No matter how much you make, the need for a management strategy is still there if you intend on keeping the door open to success. (more…)
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However, with digital workspaces bridging the geological gaps, which used to force companies into the same building, a new and interesting array of issues has emerged for HR departments to tackle in order to replicate the same kind of strong bonds between supervisors and their team.
Fortunately, the adoption of online tools and virtual workspaces doesn’t only present challenges for employee/manager relations––it also presents a whole new way to communicate with your team that can potentially go beyond the limitations of the traditional office environment. (more…)
Whether you’re working through the initial startup phase of a new business venture, or are already becoming established as a successful company in your respective industry, finding yourself being forced to bite off more than you can chew can come at any point during an entrepreneurial endeavor.
More often than not, the root of this problem is simply organizational. This involves both the organization of what you devote attention to as well as the formal structure of your company. It’s easy to get caught up allotting the bulk of your time to the less-important activities that can be redistributed to colleagues who can more efficiently manage those tasks into an intuitive work schedule. (more…)