Last week, while talking during Open Comments Night, Rick Cockrum brought up some brilliant insights regarding what were the most important things he learned when starting his business. I was so taken by them I asked him on the spot if he might write a guest post about them. I’m thrilled to say he agreed! So here it is.
Nine Things I’ve Learned While Running a Business
by Rick Cockrum
I usually write at Shards of Consciousness on personal growth topics, but my wife and I also own a bricks and mortar business, the Ambridge Family Theatre, one of the few independent movie theatres in left in western Pennsylvania. At one of Liz’s regular Open Comments night, Becky McCray of Small Biz Survival was talking about a series of posts she’s doing on starting a small business. I piped up about some of the things my wife and I spent a lot of time researching before we bought the theatre, and things we’re still learning.
- Set up a simple, adequate accounting system. A double entry accounting system will be the best. It’s not really difficult to learn the basics. There are many books available to provide you a basic introduction to how it works. By all means consult with your accountant in setting up your accounts. The key is to not make your account categories any more complicated than they have to be. A good system will make their life easier as well as yours. You could do worse than to start with the categories listed on Schedule C of your 1040. (You own a business. You will be filing using the long form for your Federal taxes).
- Develop good relationships with your vendors. Your vendors are a lifeblood of your business. Whether you’re buying stationery at the office supply shop, inventory supplies, or equipment, your vendors can save you money and time through advice and dependable service, or they can be the cause of lost business and frustration if they’re unreliable or unwilling to work with you. I’ve dealt with both types. If at all possible, replace the second type as soon as possible. The best are able to advise you on the best options for your particular needs and assist you in managing your cash flow.
- Remember that the customer is the reason youâ€™re there. This can be difficult. Equipment breaks down. Paperwork has to be done. You have to meet with your accountant. Sometimes the other demands on your time can cause you to lose sight of why you’re in business in the first place – you provide a service or product that people need and want. If you find yourself focusing on the details of running your business at the expense of your customers – stop and look around. Without them, you won’t be in business long and all those details will become irrelevant.
- Use surveys. Bring up the word survey and many small business owners start to get a glazed look in their eyes. I know I have, and sometimes still do. The idea of surveys calls to mind images of complicated questionaires and irrelevant questions. It doesn’t have to be that way. Surveys can be as simple as asking your customers a question, and marking the answers down on a sheet of paper, then toting up the answers. They can tell you a lot about what your customers want and how they make decisions. Through them, you can make decisions about the best way to run your business. I’ve used them to help decide what types of movies to get, the best places to advertise, and what type of concession inventory to stock.
- Learn the difference between advertising and marketing.Use them both. Marketing is the sum of the activities you perform to get the word out about your business and attract the customers you want. Advertising is one marketing activity. It usually entails publishing paid announcements about your business. At our theatre we advertise in the local paper weekly. Our marketing consists of a website, word of mouth from our customers (our best marketing), involvement in local activities, public service functions, involvement with local business groups, talking about the theatre in the course of day to day conversations, signage. You can see that advertising, while important, is only a small part of marketing.
- Find a good bank. Rather, find a good banker. Your banker is the loan officer or bank manager who handles your account. As with all aspects of business, your relationship is with an individual, not an institution. Even though it often seems the banker’s job is to tell you no, that isn’t true. The banker’s job is to make money for the bank. Within the constraints they work under, a good relationship with your banker can improve your chances of getting credit, lower your fees, speed up the credit process, and get you contacts with other members of your community for your mutual benefit. As with any relationship, this one takes time to cultivate. Don’t wait until you need something to start. You want your banker to be able to deal with a person, not a credit application.
- Learn about the SBA (Small Business Administration). The SBA is one of the few things the federal government has done that can make your life in small business easier. The SBA website has a wealth of information on starting and managing a business, forms you can use, information about business law, information about grants and loans, and local resources for training and advice. Spend time, a lot of time on the site. You’ll gain the basics of a business education.
- Check into an SBA loan. One major service the SBA performs is to guarantee loans for small businesses. You still have to be creditworthy. You still have to have collateral. But qualifying for an SBA loan can mean the difference between getting the money you need to start your business and not getting it. If you have a need for financing, check into this resource, beginning at their website, then continuing with your banker. If nothing else, putting together the loan application will guarantee that you have a valid business plan and will make you consider details in starting up that you might otherwise have forgotten to think about.
- Learn how to value your business. You may not think it is important now, but knowing how much your business is worth will be important to you. You may decide to sell someday. You may need to apply for credit. In both these, and other cases, the value of your business is important. I still have a tough time with this, because appropriate information is difficult to find and varies from industry to industry. Just as the best way to find the value of a house is to hire an appraiser, the best way to find out how much your business is worth is to hire a professional. Not only will they help you find the value of your business, their appraisal can help you increase it’s value by showing you where you can improve your business processes to cut expenses or increase income. As a rule of thumb, a business can be valued at 3 – 5 times pre-tax net, but this is an estimate done with a very broad thumb.
Liz was kind enough to ask me to expand on my comments for here. This is the result. This list doesn’t cover everything you need to learn before you open your business, or everything that will be useful during the life of your business. It does cover many ideas that we have found useful in running our business and that people often don’t talk about. You’ll notice that many of these center on the importance of relationships in the success of your business.
Thanks, Rick! This post is gold!