Now is the time to evaluate the performance of your business and discuss the actions that need to be taken for 2012. Here are 12 items that should be on the list.
Get more leverage. Having a small business is all about finding the leverage that makes the company more profitable as it grows. How can you make money that is not solely about your time? It needs to be based on billing of employees’ hours or effort, on your intellectual property or on economies of scale in marketing and distribution. Which model can your business exploit in 2012?
Fire nonperforming employees. Everyone knows who isn’t doing their job at your company. Admit it. You know it too! Step up and fire these people today. This rule goes for nonperforming vendors and customers that are too expensive to service. All of these people took money out of your pocket in 2011 and cost you more money than they are worth. In 2012, by firing these people, you will be giving yourself a raise!
Shut down the nonprofitable parts of your business. Determine what makes money in your business and what is simply a drain on your resources. In 2012, there simply are not enough resources to do both. If you can’t figure out what parts are profitable, talk to your accountant.
Increase monthly cash flow. Increasing your cash balances is the goal of small business. Can this be accomplished by issuing less customer credit, or collecting from your customers sooner? Can you take longer to pay your bills or service customers with less inventory? As credit remains difficult throughout 2012, stock piling cash to fund your own business becomes critical.
Increase profitability. This is done by raising prices or lowering expenses. Most customers buy based on the value you provide in solving their pain. Additionally, play the expense game for 2012: If you cut a particular expense to $0, what would be the true effect on your business? Be honest and the answers will shock you.
Reduce fixed overhead. As the tough economy continues in 2012, expenses should be as variable with revenue as possible. High fixed costs will kill many businesses next year.
- Ask for more referrals. Ask your satisfied customers to connect you with others having similar pain. Make getting a referral a normal part of your everyday business rituals in 2012. Be aggressive!
What changes will readers be making in 2012?
Prepare for tax law changes including payroll, benefits and depreciation. Open Forum contributor Barbara Weltman advises, “Meet now with your tax adviser to review coming changes. This will enable you to do year-end planning to save on this year’s tax bill, as well as budget more accurately for the coming year.”
Hire people on commission. Serial entrepreneur Tadd Rosenfeld says, “The biggest change we're making is emphasizing sales force over other types of marketing to attract clients. The slow economic environment means there are truly talented people eager to earn commissions. Because many are wiling to work without base pay, this is a very low-risk approach to marketing that can yield superb financial results.”
Call your customers frequently. "We are a services business, so effective communication is critical," says Susan O'Neil, founder and CEO of Website Publicity. "We have weekly phone calls with our clients to review their online campaigns in search, social and mobile. While phone conferences are great, and even web conferences can be scheduled pretty quickly and easily, we'll now be offering clients the immediacy and intimacy of FaceTime via the iPads we'll be giving to client reps and campaign managers."
- Affiliate with other businesses. "We have found being a reseller or affiliate for third-party companies has added additional revenue sources that are low cost and yield high returns for our business," says tech and innovation consultant Cynthia Nevels. "We believe if we invest in smart products...we can capture longer-term clients for sustainable income streams monthly versus one-time sales."
What actions are you taking now to prepare for 2012?