This simple strategic planning technique can help you identify what your business is doing well, what it needs to improve, where it needs to grow, and what could be its undoing.
Choosing the right direction for the future of your company can be a daunting task. Should you add services? Is your team staying competitive? How can you improve cash flow?
All of these questions and more can be answered by performing a regular SWOT analysis.
What is a SWOT Analysis?
SWOT stands for strengths, weaknesses, opportunities and threats. Taking a deep look into your business by examining these four elements will provide you with an overview of the health of your company. Your strengths and opportunities offer avenues for your company to flourish, while your weaknesses and threats can inspire improvement and help you recognize emerging competition.
It’s likely that you completed a SWOT analysis in the beginning stages of your business plan to help determine where you stood in the market and identify target customers. Now that your business is established, it’s imperative to conduct regular SWOT analyses to help improve your operations and systems and stave off problems.
How to Get Started with a SWOT Analysis
The most vital step in conducting your SWOT analysis is determining what your strengths, weaknesses, opportunities and threats are, but sometimes they can be hard to narrow down.
Suggestion: Reach out to your SCORE mentor and ask to sit down and work through a SWOT analysis for your business.
The odds are that there are a lot of other businesses in your market providing similar products or services. So what is compelling about your firm that sets you apart from your competition and entices potential customers to buy from you?
Many business owners will answer with the “soft” differentiators, such as reputation, good service and high quality. These are all great characteristics (and absolutely necessary!), but do they really set you apart? I’ll bet that if you ask your competition what sets them apart, you will get similar answers.
The fact is that highly differentiated firms are generally more profitable than their counterparts. Their overall market may be smaller than a less differentiated firm, but they have more of it (the proverbial big fish in little pond). And, they most likely charge more and spend less on advertising and marketing. Continue reading →
Cash is the fuel that makes a business run. It is needed to pay salaries including your own, fund marketing programs to acquire and retain new customers, invest in equipment and facilities, pay rent, supplies and many more day-to-day activities. Most financial experts recommend three to six months of operating expenses, but using this for every business in every situation is misleading.
To determine how much cash you need, you must look at the following key areas.
How Much Cash Have You Been Using?
If you’re an established business owner, look at your monthly cash flow report (or go to the next paragraph if you’re a start-up). This report will provide an historical and seasonal perspective. Note the cash received from sales and the cash spent. The net of these two is often referred to as the “net burn rate.” For example, if you have $50,000 in sales and $30,000 in expenses, then your net burn is +$20,000
Your “gross burn rate” only takes cash expenditures into account; in our example, that’s $30,000 and is the more conservative amount, since it does not assume any sales are made. Historical spending patterns are a good starting point in considering future spending plans. Continue reading →
So, you want to sell your business. For most of us, it is a once in a lifetime event. There is no reason to expect that you should know the intricacies of a transaction.
That is why it is oh so important to have good advisers help walk you through the process.
One of the fundamental decisions you will need to make is whether the transaction will be an asset or stock sale. It will depend upon your individual circumstances as well as your business structure. Continue reading →
Have you ever heard of it? Well, if you are thinking of selling your business in the next few years, it is a term that you should get familiar with.
The value gap is the difference in price between what the seller thinks his/her business should sell for and what a buyer is willing to pay for it. Bluntly, it is unrealistic expectations on the part of the seller.
Sadly, it is one of the bigger reasons why deals go awry in the lower-to-mid market tier. And, it can be avoided.
Causes of the Gap
There are a variety of reasons why a seller may think that their business is worth more than what others are willing to pay for it.
Don’t make the all-too-common mistake of dismissing the value of planning for your business. Every well-run business needs to manage strategy, tactics, milestones, metrics and essential business numbers.
Do it right, and planning is easy to do, great for managing and developing accountability.
Remember these two key points:
Good planning doesn’t require a big, formal, traditional business plan document. A lean business plan is much easier than a traditional plan. It just consists of bullet-point lists and tables. You can do it yourself.
What really makes the difference is keeping the plan live. It doesn’t take more than an hour or two per month. The planning process means you track results, review, and revise often enough to keep your plan fresh.
Should you grow your business? It is a simple question with an assumed answer. The answer, of course, is YES! But, I am not sure it is quite so simple.
Before you invest your hard-earned money and time, think about what you want to accomplish and why. Then, carefully consider your options.
Decide to Grow
We have all heard horror stories of businesses that over-extended, only to lose it all. If your expansion strategy is not well conceived or executed, it could be a costly misadventure, both in terms of money and focus on the existing business.
If your business is well-established, has a loyal customer base, is reasonably protected from the competition, profitable and affords you the lifestyle you have sought (both in terms of discretionary income and time) then think hard before you take on an expansion strategy. Understand your goals – both financial and personal, before moving forward. Continue reading →