Business Management

Key Management Skills

To run a successful business you need a diverse range of business management skills. Here are some of the keys areas of successful management.

1.     Time Management:

Having time management skills is simply having the ability to recognize and solve time management problems. It is as the old adage says, to never put off for later what can be done right now. You can develop this personal management skill by keeping a calendar and beginning to schedule everything including scheduling free time.

 

2.     Financial Management:

“It is not how much you make that counts but how much money you keep” – Robert Kiyosaki, investor, businessman, and author of best-seller Rich Dad Poor Dad

The keys to successful financial management revolve around the ability to create wealth for the business, generate cash, and provide an adequate return on investment for owners of the business.

 

3.     Communication Skills:

Business is all about people regardless of your industry and you will encounter a range of people on a daily basis in the operation of your business from customers and suppliers to employees and business associates. With great communication skills comes the power to influence and encourage others and yourself.

 

4.     Leadership:

A true leader inculcates feelings of confidence, admiration in the followers and a sense of commitment towards the business. A leader influences others to follow him. Leaders need to be flexible, adaptable to change and encourage these qualities in the team members too. Being innovative is important for business growth. Innovation is a skill in itself. Leaders need to be open to new ideas, they need to innovate, bring in positive change as and when needed and progress.

 

5.     Foresight:

This is important in business management. You need to be able to sense trouble ahead of time. You need to be prepared for it and plan accordingly. You need to think ahead of time to be ahead in the industry. An excellent example of a manager and business developer with foresight was Steve Jobs. You can't just ask customers what they want and then try to give that to them. By the time you get it built, they'll want something new, he said. He believed in anticipating customer needs in advance to be able to give them products they would start wanting. 

Management is about taking the right decisions at the right time and getting them implemented by the right people. Effective business management requires you to have a variety of basic skills. The skills outlined here certainly are not all inclusive. Perhaps, the most important thing you need to have is common sense.

Business Financing

Business financing issues

Finding a supportive financing institution or bank is the start of one of the key relationships in the life of your business. Understanding how potential financers look at a business can increase your chances of success in landing the financing needed.

Outside views will take an objective look at your business that might not be consistent with your vision.

Sometimes entrepreneurs think they should receive more money than the fundamentals of their business merit. They also often underestimate the riskiness of their project.
At the same time, entrepreneurs shouldn’t forget that banks and other financial institutions are in business too and need to find and keep clients. That can make them an invaluable resource for new business owners.

Whether your plan is to start a business or expand your existing company, here are some key factors to consider when seeking financing.

1.     Types of financing

-        There are two types of financing: equity financing and debt financing. When looking for money, you must consider your company's debt-to-equity ratio. This ratio is the relation between dollars you've borrowed and dollars you've invested in your business. The more money owners have invested in their business, the easier it is to attract financing.

-        If your firm has a high ratio of equity to debt, you should probably seek debt financing. However, if your company has a high proportion of debt to equity, experts advise that you should increase your ownership capital (equity investment) for additional funds. That way you won't be over-leveraged to the point of jeopardizing your company's survival.

2.     Your financial capacity

Having a solid credit history says a lot about your trustworthiness and ability to run a successful, profitable business. A willingness to put a significant amount of money into your business will show your lender that you are committed to the project and willing to share the risk.

The lender will also want to know how you are going to use the money, when and how you are going to repay your loan and whether there’s any security that can be pledged against it such as equipment, buildings or personal property. It might take two or three meeting to sort everything out.

3.     Know your break-even point

-        Breakeven analysis is a tool used to determine when a business will be able to cover all its expenses and begin to make a profit. For the startup business, it is extremely important to know your startup costs; you need to understand the level of sales revenue needed to pay the ongoing expenses related to running your business.

-        A startup business owner must understand that $5,000 of product sales will not cover $5,000 in monthly overhead expenses. The cost of selling $5,000 in retail goods could easily be $3,000 at the wholesale price, so the $5,000 in sales revenue only provides $2,000 in gross profit. The breakeven point is reached when revenue equals all business costs.

-        To calculate your breakeven point, you will need to identify your fixed and variable costs. Fixed costs are expenses that do not vary with sales volume, such as rent and administrative salaries. These expenses must be paid regardless of sales, and are often referred to as overhead costs. Variable costs fluctuate directly with sales volume, such as purchasing inventory, shipping, and manufacturing a product. The formula for determining your breakeven point requires no more than simple arithmetic.

The lender wants to see that you have built your plan based on a sound analysis that takes into account the market, the competition and the economic context. Do your own research and show that you know the trends, the opportunities and the risks when you present your plan. This boosts your credibility and a simple, concise presentation of facts and figures will back up your statements and business plan.

Business Principles

Business Principles to follow

Business owners don’t often think about basic operating principles but here are a few thought starters to ponder on what fundamentals drive the business.

1.     Measure risk

In early stages you can have an appetite for greater risk as there is lots of time to recover if you misstep. As the business and ownership matures perhaps a more prudent approach to risk taking is appropriate.

2.     Maintain control

Take a hands-on approach to accounting and record keeping as a means of gaining a better feel for the progress of your company. Gaining control of accounting and record keeping allows you to end any dubious activities promptly.

 

3.     Communicate, Communicate, Communicate

Whether it is with investors, customers, co-workers, or business partners, you have to over communicate.

Listen carefully, communicate regularly, be clear and concise.

 

4.     Be Respectful

Treat others with the utmost of respect. Regardless of differences, positions, titles, ages, or other types of distinctions, always treat others with professional respect and courtesy.

 

5.     Build a network

The activity of building a network of contacts within the industry and the local business community will be invaluable in the long term. Attending networking events and community activities can expand awareness of the business and expose potential future consumers to your products or services.

 

There are many other principles that could be added to the list; these should provide some input to how you operate your business.

Business Failure

Why Businesses fail

There are many reasons businesses fail and these have been well documented. Some articles should be required reading for entrepreneurs starting into business would be well served to research the topic before starting their own venture.

This article will serve as a reminder to some of the more common issues and I hope create some additional focus by owners to avoid the same fate.

1.     Weak Management

New business owners frequently lack relevant business and management expertise in areas such as finance, selling, production, and managing employees. Unless they recognize what they don't do well, and seek help, business owners may soon face issues of a failing business.

2.     No long-term plan

Often there is a focus on short-term profits. It is obvious that there must be profits but this should not be at the expense of building a long term value in the business and understanding the potential of long term customer relations. Building value requires hard work and planning based on good current information and a realistic forecast of the future.

3.     Uncontrolled growth

Seem surprising? Too much growth? Over expansion can be fatal if the business does not have the resources to cope with growth including appropriate financing, personnel and capacity to meet demand. Sometimes less is more.

4.     Poor accounting

The business cannot be managed if owners do not know what is going on. Without accurate financial information the business is flying blind. Don’t expect the accounting firm who does tax filing to keep track of day to day business; that must be handled within the company by the CEO or top finance person.

 

5.     Inefficient operations

Paying too much for rent, labor, and materials weakens the bottom line. The leanest companies are at an advantage and usually are more flexible and adaptable to market change. Not having the tenacity or awareness to negotiate terms that are reflective of today’s economy may leave a company uncompetitive.

The marketplace is rarely forgiving and owners need to eliminate missteps that certainly are avoidable with a little insight into business management.