Importance of Reporting for Decision Making

Treating your business like a "business" from the start is the difference between success and failure. Running weekly monthly and quarterly reports, keeps your eyes on the numbers and you abreast of changes as they happen. Using week over week, month over month and year over year report comparisons help you evaluate whether this just a one time occurrence or the beginning or end of a trend.

So many business owners, especially solo-preneurs misunderstand the value of reports. "If I'm the only person in the business, why do I need reports?", one client quipped. My response included the following 3 points: 1) reporting gets you in the habit of running your business like a business instead of an extension of your personal life and finances, 2) reports set a precedent of how operations, meetings and reviews will be conducted in the future as your business grows beyond just yourself, 3) reports give you a collection of data from a finite period in time that is sorted and analyzed based on specific criteria critical to your business.

So what reports are absolutely essential? In some ways, that question is unique to the type of business, the reporting of a retail business will differ from that of a service company. However, in my opinion, all businesses can benefit from the following 3 reports on a weekly basis: 1) A Balance Sheet, 2) A Profit & Loss, & 3) a custom report.

An example of data in a custom report would be the following: using an excel sheet you would zero in on specific numbers in your P & L to create a summary week over week, month over month or year over year report.

For example, the owner of a scuba store that also offers classes may want to view the following information for this week, this month, so far this year Vs 1 year ago for the week, month & year:
Sales
# of classes sold
# of dive trips sold
# of equipment sold(i.e- tanks, masks, suits, etc)
Expenses
Advertising
Labor
Utilities
Supplies & equipment

Seeing this data in a report makes it so much easier to make informed decisions based on actual events instead of gut feelings and I think so there for it is.

Feel free to contact me if you need one on one consulting on structuring reports and using them effectively for your business.

Have a great week!

Survival Tips for Tough Times

All of the current economic data predicts that 2009 will present many more challenging months for business owners. If you and your business are fortunate enough to have survived the tough times in 2008, here are some tips to guarantee survival in the new year:

1) Ask for Discounts- ask all of your vendors for discounts on purchases, shipping, surcharges and fees.

2) Trim the Fat off Every Bill- Often times bills for recurring services like pest control, phone service, bottled water, web hosting, and certain advertising are laden with charges for extra bells and whistles you can do without in exchange for saving a buck or two.

3) Compare Bills to Prior Months for Price Increases- If you notice surcharges, increases or other fees that are increasing your costs, call the vendor and ask for a waiver or reduction.

4) Renegotiate Interest Rates on Credit Cards- Become an interest rate hawk, call your credit card provider and ask for a rate reduction. Most companies will decrease rates for clients in good standing.

5) Talk to Your Landlord- For lots of businesses, rent is the largest expense, ask for some temporary relief and use the saved cash to establish an emergency fund.

We all know good times are ahead. The smart & savy Entrepreneur business owner who can survive this environment will do very well when the economy recovers. Taking some of these steps will help to ensure you are here to reap the rewards of all your hard work.

An Emergency Fund is Part of Sound Fiscal Planning

In personal financial planning, it is recommended that individuials set aside an emergency fund of cash equal to 6 months of living expenses in case a job loss or other interuption of income occurs.

This is great advice not only for individuals, but for business owners as well. I have always felt most comfortable in business with 3 months of operating expenses in reserve and another month or 2 available on some sort of credit i.e.-credit lines, credit cards, etc. These reserves can allow the business to weather any economic storm without reducing the owners personal compensation while he/she rides out the tough times. If the reserves had not been set in place, and the business owner is already managing the businesses expenses aggressively, the only remaining place to cut is owner compensation. For business owners, this should always be a last resort.

In my businesses, the chances of me losing 100% of monthly revenue is very slim. But in these economic times, it is quite possible to have a 30% or more sales dip in one or several months. In those months I thankful I have my reserves in place and that I put a little bit away for a rainy day.

Check out our home page at http://www.operationentrepreneur.com