Does the business run you, or do you run the business?

Owning a small business can be tricky, and running one can be even trickier. We often find ourselves working “in” the business and not working “on” the business. We believe that the business is us, and so we rarely look at the business on its own. 

Does the business run you, or do you run the business?

Some owners might only be able to grow and/or manage a business that is $500,000, while others can grow to $2 million, and others can grow to $10 million. For example, a question of highest and best use in real estate might be to wonder if we were going to build the City of New York now, would we dedicate such a large piece of land to a park, or would some of that dedicated park space be used to develop more buildings, businesses, and roads to make a higher profit? 

Thinking about the “working on your business” part of your job is usually only done while we are driving from one appointment or job to the next, while we’re attending a seminar or convention, or in the middle of the night. Taking time to sit and think about you and your business and what you want it to be, is crucial. However, as an owner or manager, it also tends to be the part of running a small business that we avoid. 

The beginning of the process of asking “Who do you want your business to be” starts with knowing who and what your business is right now. To do that, you must find the answers to these basic questions:

From your income statement or profit and loss:
1.    What are the annual sales?
2.    How much does material cost as a percentage of sales?
3.    How much does labor cost as a percentage of sales?
4.    What is your gross profit as a percentage of sales?
5.    How much is the sales cost, including commission and marketing, as a percentage of sales?
6.    How much is overhead? Does this include rent, fuel, and insurance?
7.    What is your net profit as a percentage of sales?
From other sources: 
8.    How many jobs are there a year, which creates your average sale?
9.    What are the basic demographics of the average customer?

Determining the answers to the questions above provides you with a base point that will allow you to answer the bigger question: “Who does your business want to be?” 
If you know where you are, and you know where you want to be, the next question is “When?” This part requires time.

Consider the questions below vital in developing your plan and timeline:
•    How will you get there?
•    When will you get there?
•    Who will you need to get there?
        a) Sales and installation help
        b) Office help
•    What will you need to get there?
        a) Equipment
        b) Trucks
        c) Software
        d) Building
After addressing the following: 
•    Where you are 
•    Where you want to go
•    Developing the plan
•    Your timeline

You will then have the tools to measure your journey, and you will have a map to know when you have arrived. What remains after that is both the hard and fun part. Work the plan!

Be sure to track where you are to where you want to go on a regular basis. Some areas should be tracked weekly, and other areas can be tracked monthly, but do not let more than 30 days go by without looking at your comparisons. This is the minimum amount of time you should spend working “on” your business. Remember, nothing is set in stone. You can always change your mind regarding where you want to go but beware. If you start down a path that involves purchasing equipment or trucks, and that path involves monthly payments, there will be consequences if you change the plan.

It is up to you to decide how much and which areas you want to address at any given time. You can keep your annual sales the same but increase the average job size. This would allow you to go on fewer appointments and fewer installations. Or, you can focus on increasing your net profit while keeping the revenue the same. 
In closing out this four-part series, you must decide about your commitment. If you make a plan, are you committed to it? We are only as good as our commitment to our commitments!


Have something to say? Share your thoughts with us in the comments below.

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About the author
Tim Coleman

Tim Coleman is branch manager of SCE Unlimited Chicago, a div. of IBP. Coleman founded his closet organization company in 1988 and ran it successfully for nearly 30 years. In October 2020, he took the helm at SCE Unlimited, which offers wire and wood organization systems, hardware and accessories.