The Importance of Proper Business Management for Small Business Owners

Running a small business can be both rewarding and challenging. While passion and dedication are essential for success, having a solid understanding of how to manage your business properly is equally important. In this post, we'll explore why proper business management is crucial for small business owners and how it can lead to long-term success.

Maximizing Efficiency and Productivity

Proper business management involves implementing efficient processes and systems that help streamline operations and maximize productivity. This includes everything from inventory management and resource allocation to employee scheduling and client service procedures. By establishing efficient workflows and utilizing the right tools and technologies, small business owners can optimize their operations and make the most of their time and resources.

Recognizing any particular inefficiencies will allow you to investigate changes that will improve time spent on such procedures, but may also help staff moral as a result. One particular inefficiency I've encountered at a b2b wholesale distributor involved the inside sales staff. Many administrative duties were placed on the sales staff, including order status checks, accounts receivable auditing/collecting, amongst other tedious tasks. Having a proper CRM/ERP would help with creating 1-click reports for these tasks, but the company did not have one in place; the majority of data was kept on Google Sheets shared files that were interconnected. After I learned to manually do these tasks in their makeshift system, I was able to create simple data-mining spreadsheets to help reduce a commonly 2-3 hour process to just a 10 minute procedure. By putting this new process/tool in place, the staff was able to concentrate on sales again, which helped increased our YOY revenue by approximately 70%, nearly reaching a $100M revenue milestone.

Finding this inadequacy involved speaking to the staff about their specific tasks that are challenging to accomplish. Simple communication with your staff can uncover a myriad of underlying issues if you, the business owner, may not be aware of.

Effective Financial/Inventory Management

Overstocked warehouse

One of the most critical aspects of running a successful small business is effective financial management. This includes budgeting, cash flow management, financial forecasting, and accounting. By keeping track of your income and expenses, monitoring your cash flow, and making informed financial decisions, you can ensure the long-term financial health and sustainability of your business. Proper financial management also involves setting and achieving financial goals, such as increasing revenue, reducing expenses, and improving profitability.

In larger businesses, different departments will have different areas to monitor to increase profitability. In a small business setting, the majority of these will rely on the business owner. Are you monitoring your COGs (cost of goods/materials), production labor, fixed costs, fulfillment costs, materials costs, etc? Are the variable costs increasing/decreasing as your revenue increases/decreases each month? Are they somehow moving without any correlation? Finding any trends that do not make sense will help you find areas where net profits can be improved without any major action on your part. In one of the automotive accessory businesses I've monitored, we found that COGs for their specific service increased by 50% while revenue had remained flat. We were able to look through supplier receipts and find out why this occurred. This allowed us to manage some of the changes to their retail pricing to offset the cost of certain COGs and maintain a proper net profit margin.

Strategic Planning and Decision-Making

Acquisition to ROI planning for Ethereum Mining circa early 2021

Proper business management requires small business owners to take a strategic approach to planning and decision-making. This involves setting clear goals and objectives for your business, developing a comprehensive business plan, and regularly reviewing and adjusting your strategies as needed. By having a clear vision for your business and making data-driven decisions, you can steer your business in the right direction and achieve long-term success.

KPIs (key performance indicators) should be set and monitored for reach part of your business, when applicable. Social media posts may be attention in the form of likes, but are they generating any leads? Do you know your cost of client acquisition? Do you know your ideal client profile? These are important factors to ensure any advertising spend is actually creating a return on your investment. Without monitoring this, assumptions can be made to the success of each investment, but deciding where to spend future advertising revenue is not more likely to find additional clients.

Building a Strong Team

Effective business management also involves building and leading a strong team of employees. This includes hiring the right people, providing them with the training and support they need to succeed, and fostering a positive work environment. By investing in your employees and empowering them to do their best work, you can build a strong and motivated team that is committed to the success of your business.

When surveying your current staff, it is always good to consider what other skills they have beyond their normal daily function. This can help dictate the requirements you set for future hires for the company. In addition, this may create promotion opportunities within the company to ensure employees see personal and career growth without venturing elsewhere.

For most business owners, your end goal is to likely take an almost hands-off approach to have the business running itself. Finding the right employee to mentor can help lead you to this ultimate goal. This way, the employee can get direct training and decision making experience as to how you, the owner, would engage opportunities. In addition, it helps boost overall morale in the company to see that promotions within their own rank are available. Not many things can build a strong team than a happy team.

Delivering Exceptional Client Service

Proper business management also involves prioritizing client satisfaction and delivering exceptional client service. This includes understanding your target market and their needs, providing high-quality products and services, and maintaining open lines of communication with your clients. By building strong relationships with your client and providing them with a positive experience, you can build client loyalty and attract new business through word-of-mouth referrals.

Best practices would indicate contacting the client for after product delivery follow up to ensure all their needs are met. This simple procedure may seem like a time burner, but you will occasionally find additional revenue through these contacts. When I was in the new vehicle internet sales, I would follow up with my clients to ensure they're happy with their purchase, along with ensuring they've learn how to use any of their favorite features on their new vehicle. Many times, this would result in referral business being sent to me. Being able to rely on recurring revenue sources will help your business grow over time.

Adapting to Change

In today's fast-paced business environment, it's essential for small business owners to be able to adapt to change quickly. Proper business management involves staying informed about industry trends and market changes, anticipating potential challenges and opportunities, and adjusting your strategies and operations accordingly. By being flexible and adaptable, you can position your business for long-term success and weather any storms that come your way.

Some of the changes may come as a surprise to you, from when you've originally started the business. This is where Business ReManaged is able to help. Our team is able to help optimize your business and surmount new challenges as the marketplace changes.

Proper business management is essential for the success and sustainability of small businesses. By maximizing efficiency and productivity, effectively managing your finances, taking a strategic approach to planning and decision-making, building a strong team, delivering exceptional client service, and adapting to change, you can position your business for long-term success and achieve your goals.

Need assistance to measure how well your business is optimized? Schedule a web meeting so we can discuss your business's unique situation and how to remanage your processes for optimized business procedures and more.