The basics of running a business in 4 steps!
The basics of running a business in 4 steps!
The basics of running a business in 4 steps!

 

“The mechanics of running a business are really not very complicated when you down to essentials.  You have to make some stuff and sell it to somebody for more than it cost you.  That’s about all there is to it, except a few million details.”

John L. McCaffrey, (1953 speech)

Many things in business have changed since McCaffrey made that statement.  Some things may not have changed.  Certainly the statement is true.  The basics of doing something to generate more income than expenses is still the key.

A recent article that I read took the position that there are only four things that a small business needs to track.  So, lets look at the four things!

First is your daily sales.  As I write this it is first Thursday of June.  How does my “sales” today compare to Thursday of last week and the first Thursday one year ago?  Are sales getting better or worse?  Is there a particular reason?

Second is your daily labor costs.  Labor is one of the largest expenses for most businesses.  Tracking it is one of the keys to profits.  If labor is 50% of your costs a 2% reduction means a 1% addition to the bottom line.  If marketing is only 1% of your costs you have to eliminate it entirely (and suffer the consequences) to achieve the same result.

Verify your cash and credit card deposits.  Make sure your sales are actually getting into the bank.  If there is a discrepancy you want to know what caused it.  Is it errors in making change?  Theft?  Unrecorded sales?  If you don’t verify you will be much less apt to identify problems before they really hurt you.

Maintain your cash flow records.  Cash flow is the lifeblood of the business.  You need to track it constantly.  Of course, some things can’t be anticipated, such a blizzard in December.  Certaianly it will cause a drop in sales, and hopefully it isn’t a regular occurance.  But don’t think it won’t matter.  If you don’t have the cash at the end of the month to pay the rent it’s going to matter a lot.

And after that, look at the million other things that you have to consider.

Steve

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