GROW YOUR BUSINESS. gyb 2015 IN THIS ISSUE: How to Avoid Financial Pitfalls. Setting Salaries. Asking For Referrals Tactfully

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1 IN THIS ISSUE: How to Avoid Financial Pitfalls Setting Salaries Asking For Referrals Tactfully Help Your Community, Help Your Business

2 How to Avoid Financial Pitfalls Creativity, determination and perseverance are some of the top qualities successful business owners possess. One they often lack is the ability to manage the financial side of the business. More often than not, failure due to financial hardship can be traced back to the very beginning of the process. A startup costs money - lots of money - something that is often underestimated by small business owners. It s a costly and dangerous mistake to make So how can you avoid financial distress? 1. Cash reserves - this is the most important step. Starting with an adequate well of reserves can allow for spending flexibility and a safety net that can and will assist through each stage of business development. A cash reserve pulls you out of unpredictable pitfalls and helps work through the difficult first years where profits are not yet piling in. 2. Set realistic goals, across the board but most importantly when it comes to your sales/profit goals. These are what you are basing the rest of your operations on - the assumption you will make X amount of money in Y amount of time. Assumptions and projections are just that - assumed and projected, not confirmed! Back up your projections with quantifiable calculations, real numbers and real assessments - the more specific, the safer. Avoid mixing personal and business expenses in one account. 3. Don t mix business with personal. This goes for personnel, operations AND financial management. In this instance, the pitfall to avoid is mixing personal and business finances. Separation of accounts is an absolute must - and do everything you can to keep it that way. If you have to borrow from personal sources, write it into the business plan as an investment. 4. Controlled spending and limited borrowing can also keep you out of the danger zone. Big, unnecessary expenditures will create a sinkhole that is hard to get out - you must be choosy, tighten those purse strings. Purchase what you need to get by, and not more. While borrowing is often necessary, amassing huge debts right off the bat is a no-no. The deeper you go in the hole, the harder it is to climb out later in the game. There are plenty of software programs out there that can help keep finances in check - consult with us on what might work best for your business. Money management and crunching numbers may not be your specialty, so when in doubt, ask the experts! 1

3 Setting Salaries Payroll day every small business owner s least favorite day! Complicated, confusing, yet important and mandatory. Yet setting initial salaries can often be the most stressful part of this process. There are some across the board tips that can help a small business owner when setting up a pay scale for employees, and for themselves as the business owner. It starts with the typical argument - hiring the best means paying the most. So what do you do? You want to recruit strong, knowledgeable candidates, but that means you have to offer a competitive wage. As a small business, this can range from difficult, to impossible. Number one rule: never pay more than the job is worth. When we say worth, we mean how much is this skill set worth to your business in particular? If you have a marketing background (rusty as it may be) perhaps you can manage without a marketing manager for the first year, freeing you up to fill a more pressing position. Figure out the most and least you are willing to pay for each desired role and go from there. Now you have a scale that can be applied to applicants and their relevant qualifications. Speaking of qualifications, remember that salaries should always be based on merit and qualifications. Bottom line, more experience = more money. Be wary not to shortchange those with years of industry experience - word gets around! Assess the competition, find out the industry standard and apply these to the current market conditions. Seemingly a simple process, deciding on a pay structure can often be the most complex. Will you pay hourly, salary or commission based? This is where a deep assessment of your industry standards will come into play. Hours worked, scope of responsibility, experience, goals, expectations and complexity should also be assessed and applied to the decision making process When determining compensation, even at the most basic level, always consult with your legal advisor/s. Legislation can also have a big impact. You want to remain fair, but competitive; attractive yet affordable; legal yet do-able! Besides skills and experiences, salaries should always be based on scope of work and expectations. 2

4 Asking For Referrals Tactfully You are a new or small business, you are running a tight ship when it comes to expenses, yet you need to get the word out there. The best place to start is with your happy returning clients and to rely on good oldfashioned word of mouth - it s effective, fluent, and free! A recommendation from a reliable and trusted source - otherwise known as a referral - is one of the most powerful tools in a small business owner s hands. Asking for referrals can prove to be tricky, however simple the process may seem. Often we let pride or ego get in the way or we are unable to tactfully phrase the request, and back away in fear of alienating or even losing clients. Practice some of these tips when asking for referrals and you should see results: 1. ALWAYS ask face to face. In this digital world it may seem easiest to shoot off a quick or text, but underestimating the time it takes to make the request automatically devalues the referral itself. Schedule a coffee or lunch meeting, your treat and make the client understand that their words carry weight and you value them. Clearly, the average value of the transaction will determine just how you approach this. 2. Be clear in what aspects you are looking to promote, and why you are choosing them for the referral request. Highlight the positives in your relationship and bring to the surface some suggestions for talking points. Making it seem easy is your job. Let your clients know that you value their feedback on your business. 3. Don t combine the request with another less meaningful task. This takes away from the importance of the referral request, and it is tactless. Never drop an invoice and request a referral! 4. Instead, time your request with a positive note; strike while the iron is hot, so to speak. 5. Be prepared with a laundry list of why a client might refer you - yes, it s up to them, but it helps to provide them with notes. Referrals are very personal; the notes should be more of a prompt, encouraging engagement and trust. Now that you have made the requests, make sure you know your role in the process. You MUST follow up with referrals. People get busy, time slips away. Be the reminder that they need, or your client s kind words will go unnoticed! And always, without fail, thank your referrer. 3

5 Help Your Community, Help Your Business It s been said that small business is part of the heartbeat of the larger community. No one knows better than a small business owner, the importance of community acceptance and support. Understanding the best ways to reciprocate that same support and acceptance is crucial to a business owner. Consider sponsoring a charity. Do your research and make sure it has clear ties to supporting your community directly. Don t pick arbitrarily. What you support is a representation of both your business and yourself. Remember that giving back can help your business. Joining the Chamber of Commerce, sponsoring a sports team, or creating a scholarship or fundraising initiative are great ways to start. FOSTERING EMPLOYEE LOYALTY Small businesses filter money directly back into the community by creating jobs and providing services/products that are in demand, helping to shape the community s identity. Small businesses foster personal relationships between business owners and customers. They solidify partnerships and seamlessly create interwoven networks with similar goals. Start local. Get involved in community initiatives and support or even develop your own. Identify something you see as being needed and sponsor a cleanup, fundraiser or rally to raise awareness (and not-so-shamelessly promote your business!). Being a sponsor of a social event can raise awareness of your brand and promote your business. Offer Volunteer Days to your employees, encouraging them to use a much needed day off to help others. This is a paid day off, spent helping the community - it s a win-win! Involvement in the community promotes awareness of you and your business, paints you in a positive light, and encourages customers to try you out. While it s important to solidify a presence in the community, it is equally important to keep the home fires burning - in this case, keeping your employees happy. Happy employees means loyal employees. To gain the best insight into what perks would be most desired, set up an Employee Satisfaction committee and meet regularly to hear ideas. 4

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