02/ 01/ 2006
by Steve Strauss
Q: Like many small-business owners, my New Year's resolution is to make more money this year, but how do I actually keep that promise? Keeping resolutions always seems so difficult, but this one I really want to keep!
A: The secret to keeping your business resolutions is to put a plan in place early on and then take consistent action to follow the plan. If you do, before you know it, you will you have made more money and kept your resolution.
Here are a few things that might become part of your plan:
1. Draft a mini-business plan: The first way to keep your resolutions is to take the time (an afternoon should do it) to draft a quick business plan for the next year. Of course, the typical business plan looks several years into the future, but with a mini-business plan, all you need to do is analyze and look at the upcoming year.
What is it you want to accomplish? What obstacles will you face? How can you overcome them? What will it cost? Putting it all down in writing will force you to think through your plans and come up with specific ways to accomplish those goals. Creating benchmarks along the way (gross sales, profit) also helps you know if you are staying on course.
2. Reduce your overhead: Part of your plan can be a budget, and that is where reducing your overhead comes in handy. When you want to make more money in your business, you have two options. Of course, everyone typically thinks they have to sell more. That is one way, but there is another way, too: Cut your overhead.
If labor costs are a headache, come up with a few ways to reduce your costs. Maybe some employees can go part-time. Maybe your benefits package has to be reduced. Maybe someone has to be let go.
Also, look for ways to cut your insurance premiums. What about your rent? Is there an alternate, adequate location that is more affordable? Will your suppliers cut some costs?
The great thing about reducing your overhead is that it can have substantial long-term benefits for your business. Resolve to find five cost-cutting measures in the New Year and make that part of your plan.
3. Increase your fees: Many small-business owners become fearful of the idea of raising their rates because they worry that it will drive customers away. That may happen, but there are ways around that unenviable fate:
- Test your new plan first on a few customers and see what happens. If there is no revolt, you're safe to roll it out.
- Before you roll out the new price increase, give customers plenty of notice.
The great thing about raising your rates is that it reminds everyone (yourself included) that there is substantial value in what you do, and that value is worth remuneration. It also is the gift that keeps on giving. An extra sale helps things for a day, but higher prices (that remain fair and reasonable) help the bottom line every day. The amount of increased fees should also be part of the mini-business plan.
4. Start a new profit center: Finally, consider adding a new profit center to your business, and mini-business plan. When Amazon.com first came online it was billed as “Earth's Biggest Bookstore.” That moniker is now gone because the site sells a lot more than just books. The best businesses, like the best stock traders, diversify their offerings. Having multiple profit centers means that when books sales are down, DVD sales are up, or vice versa. Either way, having a diversified business means that you will not be subject to every bump that comes down the economic road.
After it is all in writing, write down the specific steps you need to take to accomplish these goals, and then list dates to have those steps accomplished. And then, presto! Mission accomplished.
