Chapter 19. One Step Further: Growing Your Business
Judy Glick-Smith_, Integrated Documentation, Inc.
So you want to grow your business. You have been an independent contractor, but you are finding that you top out on rate quickly and there are only so many hours in a day. This chapter assumes that you want to increase the amount of money you make. There are two primary ways to do this:
No matter which way you choose to grow you must be diligent in the basics of running a business. This chapter covers the following topics in the context of growing your business.
If you are in the process of making the decision to grow your business, you are probably comfortable with being an entrepreneur. (See the chapter on Entrepreneurship. Is It For You?)
Before you can plan your business, you must plan your personal life. Until you know yourself and what is important to you, you cannot address the issues of growing a business.
When you feel comfortable with your personal goals, you can plan the direction and goals of your business.
This unit describes how to plan your life and how to plan your business.
Who are you? Do you know? What roles do you play? Answer the following questions. If you answer them in the affirmative, you increase your chances of success.
Let us address the last question here. Learning to know yourself is a process that evolves over your lifetime. Get in the habit of going through this process twice a year.
Your mission statement is your foundation. It is who you are. You will find it does not change very often. In 1995, I was diagnosed with breast cancer. When I reviewed my mission statement, I discovered that I did not need to change it. If you do not know how to write a mission statement, read 7 Habits of Highly Effective People by Steven Covey.
2. Set your goals for each role you play. WRITE THEM DOWN!
What do you want to accomplish in your lifetime? What do you want to have in your lifetime? Are you willing to put in the effort to meet these goals? What do you have to do in 10 years to meet your lifetime goals? What do you have to do in 5 years to meet your 10 year goals? What do you have to do in 3 years? What do you have to do in 1 year? What do you have to do in 6 months? What do you have to do this month? You will find it does not change very often. In 1995, I was diagnosed with breast cancer. When I reviewed my mission statement, I discovered that I did not need to change it. If you do not know how to write a mission statement, read 7 Habits of Highly Effective People by Steven What do you have to do this week? What do you have to do—you guessed it—today?
If you are diligent about your goals, you will meet and exceed them quickly.
3. Review your mission and your goals in detail every 6 months.
Remember, you did not chisel them in stone. Some goals drop off the list; new goals appear.
Going through this exercise helps you focus. You may discover that you really want free time to spend with your family, that you want to be home in the evenings, that you do not want to travel. This is valuable information when you start planning your business growth.
Just as you need to know yourself, you need to know your business. Answer the following questions. These are not easy questions. Take some time to think about them; then record your answers. Start a file so that you can track this information. Review it every quarter.
Setting business goals is very similar to setting personal goals. Use the same process. Treat your business as a separate entity (even if you are a sole proprietor).
Your mission statement is foundation of the business. It is how you want the world to perceive the business.
What do you want the business to accomplish while it is in existence? What do you have to do in 10 years to have these accomplishments? What do you have to do in 5 years to meet your company’s 10 year goals? What do you have to do in 3 years? What do you have to do in 1 year? What do you have to do in 6 months? What do you have to do this month? What do you have to do this week? What do you have to do today?
3. Review the company mission and goals in detail every quarter.
Technology is changing at an increasing rate of speed. Set aside time to read everything you can about business, your industry, and the technology and methodologies you use. This will help you discover when your customers need new products and services. You will actually get to the point where you can see opportunity before your customers realize they need help. When you create markets, you become the leader in that area.
There are 3 critical pieces to managing your finances:
This chapter assumes that you have been in business for a while. Being able to read and understand financials is essential for success in business.
If you do not understand financial statements and how they fit together, talk to your accountant.
Here is a quick primer:
Chart of Accounts Your chart of accounts is a list of the accounts in your accounting system. Each account has a place on either the balance sheet or the income statement.
Balance Sheet Your balance sheet tells you what you have (assets), what you owe (liabilities), and what your company is work (equity). Total assets equal total liabilities plus equity.
Income Statement Your income statement (also called the profit and loss statement) shows your revenue minus your operating expenses which equals your net profit. The net profit is how the income statement ties back to the balance sheet. Net income appears on the balance sheet in the equity section.
Using numbers from the income statement and the balance sheet, you can determine the health of your company.
The biggest mistake I see independent consultants make is in not understanding the margin between the cost of the service, what it costs you to do business (including paying yourself). The margin is what is left over.
For example, let us assume that you had $100,000 in revenue. You pay yourself $75,000. Your expenses ran about $20,000. Your expenses consist of equipment and software, stationary, business cards, part time administrative help, professional organization dues, telephone lines, pager—in short whatever it took to run your business. This leaves you with $5,000 profit or a 5% margin. This is not a lot of money when you are thinking of hiring someone to help with the work or if you are going to reduce your billable time so that you can write a book.
When you begin hiring people, you look at the margin on each individual employee/subcontractor. In other words, the hourly bill rate minus what you are paying that person (including your share of FICA, insurance, and a percentage of your administrative costs).
When entrepreneurs get started, there is a tendency to pay employees too much and charge customers too little. To help yourself charge the amount you need to cover your expenses and make a profit, make a chart. How this chart takes form depends on your expenses and what profit you want to make.
To increase your margins, you must either increase your revenue or reduce your expenses or both.
Cash flow is the heart of your business. I do not use the "heart" metaphor lightly. Cash is to your business what blood is to your body. If it is not flowing, you die.
In addition to formulating a budget, go through the effort of projecting when money comes in and when your bills need to be paid. If you add people to your staff or if you need additional software or equipment, your cash flow position tells you when the best time to buy is.
Get into the habit of invoicing your clients on a regular basis. If you put off this chore, the payments from your customers will be later than you expected.
Pay your bills on a regular basis. This not only keeps your credit rating good, it also keeps you from getting that false sense of having more money than you can spend.
When you are growing your business, you want it to look bigger than it is. There are a number of very effective ways to do this.
Note: Do not think that just having a presence on the web is going to cause the world to beat a path to your door. You still have to get the word out that you are on the web.
Scoping projects
Looking for win-win situations
Principle-centered negotiations
Convincing clients that your employees are going to be as good as you
Reading contracts
Using your lawyer effectively
Staying in touch with customers
Teaching employees to be alert to other ways to help the client
Surveying your customers
Networking
Using STC
Checking references
Job descriptions
Company collateral
Benefits
On-going projects
New projects
Managing limited resources
Letting your client see you periodically
Letting your employee know you are concerned about their work
Mentoring
Developing an organizational chart for your business
Identifying ways to move up in your own organization
Identifying your systems
Documenting your processes
Accountants
Lawyers
Service bureaus
Subcontractors