Bizapaloozachat: Profitability, company growth, and cash flow as a function of success

Image credit: ournoidegolfdescollines.com
Please follow and like us:
RSS
Follow by Email
Facebook
Facebook
LinkedIn

As any business owner knows, profit isn’t solely defined as the money leftover once you’ve paid your bills and employees.  Company growth isn’t solely a function of how many stores you open, nor is it how much a company’s stock price is worth when traded.  Finally, having a large cash flow is not an indicator of success or growth.

Most of our chats start out with some kind of introduction.

Since New England was about to get slapped with a blizzard, it was apropos to to mention it.  I also make it a point to mention my other two blogs so that people can check them out.

The warm-up for this chat was a question:

What are the biggest challenges of running a small business?

As anyone in the chat knows, there is no one answer.  I chose legal requirements/red tape because they are among the rising costs facing a small business.  When you have to hire entire legal teams to comb through the volumes of legislation and regulations, it becomes a burden both on business operations, and the financial health of your businesses of all sizes.  It’s easy to see a business making a profit, expanding its operations, doing good by their customers, and providing great returns for stakeholders, and think that they’re made of money.    As you’ll see in a future question, you have cash in the bank, but it doesn’t mean you’re either growing, or are profiting.

Once the warm-up was out of the way, the first question was brought up:

Why did you start your business?

Technically, this and my other two blogs are not businesses as of yet, but I have enough material published, and I’m active enough on social media, that I hope to become a paid contributor to business, political, or travel blogs.

When I say “educate others,” I don’t mean “teaching them a lesson” in the academic sense, but rather to expose people to new ideas and new ways of looking at things.  I’ve written articles on:  The idea of an entire social network evolving itself into an ATS, comparing two networks with similar objectives, a positive take on a massive merger, and a recent article about the future autonomy of home appliances.

While there’s no shortage of bloggers that will share an experience with someone, each person’s experience is seen through a different lens.  I have attended a fair number of events in my short lifetime, and I only began blogging in the last few years.  Some of the vacations I’ve taken occurred before I began blogging on a serious level.  The more you write, the more material you have to show, which can add subscribers; give it time, and people become hooked on your writing and demand more.  There are travel bloggers who through affiliate or sponsorship programs are able to get paid to travel, attend events, and experience situations in exchange for an honest review.

I have connected with and follow a number of digital nomads on Twitter and LinkedIn.  I also wrote an article about my nomadic desires and laid out a path to how I would accomplish that goal.  As of this article, I’m not quite there yet, but there’s still time.

Around came the second question:

What role does money play in running a business?

 

Allowing expansion

It’s an economic basic that in order to expand a business, you need capital.  Assuming you can find a reporter who can get the details, business articles will detail the costs associated with the expansion, and seldom are they cheap.

I suppose if you were fortunate to win funding from a venture capitalist to begin a business expansion, there will be terms and conditions attached.

While it is a TV show, Shark Tank’s premise allows small businesses and entrepreneurs to compete in asking venture capitalists for funding.  Anyone who has seen more than one episode knows that while there are entrepreneurs that do come out with a deal, there are many that don’t.  In fact, I’ve seen episodes where an entrepreneur develops an ego and thinks that they are entitled to that capital.  Since the world is watching each show, even if the entrepreneur doesn’t make a deal, millions have seen their elevator pitch, and there exists the possibility that someone will invest in them.

Hiring new minds

Whether you hire the new mind by poaching them from a competitor, buy out the competitor and have the “new mind” report to you, finding them on LinkedIn by doing an advanced search, or by hiring based on a referral from a trusted source, that talent comes with a price tag, and you may not be the only interested employer.  When multiple employers seek your talents (whether it’s you by name, or simple someone with your resume), you have some room to negotiate just about every detail down to whether the company will pay relocation expenses.  Some of the greatest partnerships happen as a result of a collegiate partnership, a round of drinks, or a college project.  When those develop into something more lucrative, all parties involved should reap the benefits.

More innovation

Nothing perks the ears of an audience more than innovation.  At one time, it was as simple as offering free WiFi in coffee shops and portable charging stations at large public events.  Today, innovations by both small business and larger companies alike have allowed us to outsource much of what we do to some kind of mobile device.  Among the innovations that have made my life easier:

  • Apple Pay for my payment methods.  80% of the offline transactions are accomplished with my thumb.
  • Social media to keep my friends and family updated with the events in my life.  Check-ins trigger a number of actions within any network I’m using.
  • Third-party apps that load coupons into store apps so that I don’t have to mess with paper coupons as the store app learns my shopping habits.
  • Back when I owned a TiVo, all I had to do was search for the TV show and the DVR would set it to record, offer to record all running episodes of it, and would account for things such as live events.
  • Bluetooth technology makes it so that I don’t have to hold a phone to my head when I’m driving.
  • As simplistic as it may sound, shredders have made it possible for me to destroy unneeded documents and reduce my exposure to identity theft.

I mentioned TiVo; all major cable providers now offer them with packages.

I mentioned WiFi; the majority of major businesses now offer it in-store, or within their general vicinity.  It may not be enterprise speeds, but it’s enough to surf the internet, check social media, and get email.

I mentioned social media; I don’t know many people that don’t have an account on at least one network, even if it’s Facebook.  Social media has made it much easier and more efficient to organize and compartmentalize your life such that you can tell your story to an audience and share in successes.  Downside to this:  Employers are looking at the same story and using it in their hiring/promotional decisions.

I mentioned Bluetooth; it started with headsets for those with cellphones, but now you can send audio from any device to a system with it, you can use it to share files between computers, and in combination with NFC, it’s what powers Apple/Samsung/Android Pay.

Making sure you have what your customers want

This can be as simple as ordering a pallet of ice melt when snowmageddon is predicted to hit, and as complicated as entering into a marketing agreement with Disney to sell their products.  It also comes down to both customer demand and how the offering of the product aligns with their brand and purpose.  Don’t forget that as a small business, you want to be focused; you won’t have what everyone wants, but before you decide to carry something, you want to make sure you will get a lucrative return on your investment.

Bizapalooza made another good point:  Small businesses have to invest in themselves at the beginning.

Furthermore, I do it while working a job on the side.

Question number three was next:

Where do you put more focus in running your business; generating more customers or more profit?

Both points are highly salient.  Without customers giving you business, you won’t be earning a profit.  Additionally, without those profitable customers patronizing more frequently, you won’t have a steady stream of income.  It is inevitable that every small business will try something new to bring in a new base of customer.  Sometimes it works, sometimes it doesn’t.  Taking risks is a natural part of doing business, but recognizing worthwhile risks can make the difference between a new partnership, and losing out on a lucrative deal.

For what it’s worth, the majority of #bizapaloozachat chose ‘generating more customers.’

Onto the next question:

What’s the difference between “making money,” “keeping money,” and “taking money?”

I looked at this from a straight-forward lens:  When you make money, it’s a result of people buying your products or services and leaving satisfied.  When you keep money, you move it to where it will be most the effective.  When you take money, you are accepting money that did not come from a sale or transaction.  All businesses, large and small, engage in all three to some degree.

At halftime, we were presented with:

We throw around the word “profit.”  What does “being profitable” mean to you?

Reinvesting your own profits and keeping it in reserve is one of the hallmarks of businesses who work “smarter, not harder.”  The expression, “make your money work for you” comes to mind.  A small business should not have to rely on every transaction that comes through the door to be successful.  It also shouldn’t mean that accumulating massive wealth should allow your business to get lazy in its ways.  Small businesses run into events that will eat into their excess, and a small business should know how to handle those events, and how to budget for them.  At the very least, a business owner should have the connections and resources to employ someone who can handle those things for them.

Question number six:

Does growing your business always equal more money? Why or why not?

Business growth does not have to equal wealth.  In the business world, growing your business can involve forming partnerships with organizations or other businesses.  This can have the net result of making new customers out of the audience of your partners.  With those new partnerships both sides  access to each other’s networks, allowing for new opportunities.

The best example I can think of:  A pizza chain replaces all of its delivery drivers with Uber drivers who agree to put the chain’s sticker in a conspicuous place much like Uber drivers already do. They then agree that between a certain set of hours, to prioritize delivering pizza orders over anything else.  Perhaps, the Uber driver delivers those pizzas faster and with more efficiency than the drivers once employed by the chain.  The hungry customer takes notice of the faster delivery; knowing that Uber is a ride-sharing service, they add 2 and 2 to discover that if the pizza delivery service is that efficient, it could be just as good if they needed a ride?  Not only does the driver get more business as the hungry customer hails him one night after getting drunk at a bar, but the pizza parlor cuts costs, while potentially improving service.

I learned that not long ago, as a result of a vote by residents of Austin, TX, that Uber and Lyft were barred from servicing people at SxSW.  As a result, a number of local ride-sharing services came in to offer their services.  Take the above paragraph, allow more ride-sharing services to enter the market, and you could end up with your next pizza being delivered by an independent contractor.

Two-thousands words later, we’re at question number seven:

Is it possible to be profitable and yet have no cash? Why?

Ignoring the fact that I put the wrong answer number with this question, every time you see something on social media go viral and it turns into a “hot new thing,” think of this.

In this context, “profitable” means that you’re increasing your net worth.  Net worth doesn’t have to be in dollars; in can be your reputation, or it can simply be an idea that you came up with.  If you’re into the meme culture, each picture behind those memes came from some pop culture reference that is now embodied into the memories of most millennials, or anyone that uses social media on a regular basis.  While the memes on their own generate no wealth, they’re part of the American parlance.

Reputation is everything in business.  If people can’t or won’t trust you, they won’t be investing.  It’s the main reason why companies hire PR firms to help deal with controversy.  It’s a secondary reason why the answer, “I’m not authorized to speak on this matter” is the correct answer when applicable regardless of how a reporter will try to get it out of you.  Frankly, while an ethical reporter might be annoyed when he can’t get an off-the-record comment from you about an issue, they won’t risk their career by badgering or harassing you.

Even though the next question dealt with profitability from a fiscal standpoint, it’s important to understand that profitability can be an image and reputation situation.

What are the first things you can do to “fix” your profitability problem?

Without either goals or a mission, you’re simply throwing content at the world and hoping to get someone to notice.  All businesses, large and small should have a goal on paper, even if it’s a pizza parlor or convenience store – two business models that have existed for decades.

While the goal of a convenience store is to carry items and provide services needed in a pinch, and a pizza parlor’s goal is to produce pizza, subs, salads, and sell bottled beverages, perhaps there’s something unique about both.  Your success could be the result of something being legalized in your jurisdiction (I.E. your convenience store will sell pot brownies), maybe a new technology has been developed (I.E. your pizza parlor will be the first to use NFC payments), or offering a service not common to the area (I.E. your pizza parlor will incorporate a smoking section).

Another great comment surfaced:

As time moves forward, a business should always examine its expenses, costs, and ways of doing business:

  • Have you always offered soda to your employees?  Instead of paying to have the machine filled up, or sending someone on a trip to Sam’s Club, maybe offer a soda fountain.  In some locations, trash is included in the rent, but recycling is an additional cost.
  • How often are you marketing to customers by mail?  Email, text messages, and social media have become the new way to reach your customers.  If less than ten percent of your customers are still asking for physical mailing, it might be time for your salespeople to work on converting them to something digital.
  • Does your company have a server room?  Have you considered outsourcing those services to larger companies that do it for a living?  One of the bigger benefits of outsourcing is to pay someone else to do the heavy lifting in terms of maintenance, backups, and immediate response if trouble strikes.
  • Where red tape allows, how much paperwork and documentation do you have in hard copies?  There are some legal records and documents that have to be kept in hard copy and available for inspection (I.E. Form 4478’s in retail businesses that sell firearms), but otherwise, can your repository of records be kept in cloud storage?  Another added benefit to cloud storage for documents and paperwork – controlled access.
  • Is your business the type that even needs an office, or can things be run from a remote location?  Remote collaboration tools have become part of the norm and video conferencing is a reality for businesses of all sizes.  If your business feels that it needs to have an in-person meeting with an entire team, consider a semi-annual meet-up.

Speaking of changing the way a business operates:

What role does being “innovative” play in managing the money in your business?

On a fundamental level, managing money is a fairly simple idea.  You make sure you have enough money for payroll, expenses, and then take the rest as profit.  For small businesses, there’s software that can be used to manage budgets, track expenditures, and even help you pay your bills electronically.  Major companies hire accountants, and accounts payable and receivable teams.

Managing money also deals with the appropriate uses of the money your business makes, making worthy investments, controlling costs, and of course, finding ways to do more with less.  On the surface, these can be items such as auditing your employees’ hours to ensure that they’re not claiming hours they didn’t work, while ensuring that they’re paid for all hours worked.  It can also mean shopping around for new product vendors when service agreements come up for renewal.

Innovation can be something as something as simple as figuring out which payment method you’ll accept at a trade show, or as complicated as hiring the accountants and lawyers to lower your tax burden.  A recent innovation in the U.S. to date is the progressive acceptance of NFC payments such as Apple Pay, Samsung Pay, and Android Pay.

Since there’s always a wrap-up question for these chats, given that it was the top of the hour:

What are your tips for guaranteeing your business is profitable year after year?

Realistically, all businesses have a shelf life.  You can fulfill customer promises, you can keep them happy with your offerings, you can present them with a clean and attractive store from which to shop, and you can use technology correctly to keep them coming, but a competitive market the encourages customers to shop around will leave a business in the dark if they don’t get creative.

Some tips I can throw out there:

  • Make sure you’re on social media, even if it’s just one network.  Fewer people watch TV to get information, and radio usage is mostly for talk radio and driving music.
  • Make sure you’re taking credit cards, even if it’s only Visa and MasterCard.  Cash is dying as a method of paying as more people go to plastic as their method of payment.
  • Keep an updated and mobile-optimized website.  There’s nothing that turns a customer off in 2017 than not being able to get to your website.  There’s also nothing more awkward than visiting a website that was last updated in 2005.  Internet standards and content standards change by the month; badly designed and outdated websites make me question a business’ legitimacy.
  • You truly have to know your audience.  You can have the most expensive and technologically advanced tools at your disposal, but if your consumer base won’t use it, or can’t be measured by it, you’ll have no online data to work.

Speaking of AARP:  They periodically extend me membership via phone and regular mail, and I’m only in my thirties.  I’ve explained it to them a minimum of three times.

If you are interested in joining chats like these, be sure to follow @bizapalooza on Twitter for updates.

Please follow and like us:
RSS
Follow by Email
Facebook
Facebook
LinkedIn
About the author

Mike Rana

Mike Rana is one of those people who is hard to define, though he's not immune to being labeled for something. He likes to talk about many topics including technology, business, politics, education, psychology, and human behavior. In his spare time, Mike enjoys traveling, people watching, analyzing the world around him, writing about his life experiences, absorbing information from various social media channels, and trying to be the voice of reason in the political arena.