Lacking Business Sense You might be the world’s most proficient accountant, resume writer or artisanal baker, but your small business will eventually suffer the consequences if you lack business sense. There are three main reasons why this can happen: not understanding when to ask for help, being overly reliant on technology and overspending on marketing efforts. Read on to learn how these three pitfalls can affect your bottom line, as well as how to avoid them.
1 Reasons Why Business Sense Matters
1) It helps you understand where your money is going.
2) It helps you understand why your customers are satisfied or dissatisfied with your products and services.
3) Business sense allows you to focus on the long-term health of your business, rather than just short-term gains.
4) It helps you understand how decisions in one area can affect other areas of your business.
5) You will be better able to make informed decisions about expanding or contracting your business as needed.
6) You’ll be able to predict when new equipment purchases are necessary and know how much inventory you need on hand at all times.
7) The most successful entrepreneurs have not only strong technical skills but also a good grasp of the business side of their industry and competition.
8) They may even be able to foresee threats that might put their company at risk before it’s too late.
9) For example, Amazon’s founder Jeff Bezos had an intuition that he needed to diversify his company into retail goods even though it was only a fledgling ecommerce retailer at the time!
10) That foresight has made him one of America’s wealthiest individuals.
2 Benefits of Having Business Sense
If you want to be successful, then you need to know how to run a business. This is where having business sense comes in. In short, business sense is the knowledge and experience that allows you to make the best decisions possible when it comes to your small business. You might be the world’s most proficient accountant, resume writer or artisanal baker but if you lack business sense, then your small business will eventually suffer consequences.
A whopping 92% of all new businesses fail within 5 years due to lack of understanding and experience with running a business. Here are four benefits of having business sense:
-Achieving objectives and goals on time.
-Effective management skills. -Ability to strategize.
-Knowing what needs attention.
3 Ways to Improve Your Business Sense
- Read a book on the subject – there are many books out there that can help you get a better understanding of business sense and how it pertains to you.
- Attend classes on the subject – there are plenty of seminars and workshops that can teach you about business sense, or even just give you some tips about what to do in certain situations
- Listen to podcasts – lots of small businesses have their own podcasts with helpful advice on topics like running your small business
- Talk to other people who run their own small businesses – they might be able to give you insight into common challenges
- Try doing something new each week and analyze whether or not it was successful . If it was unsuccessful, figure out why and try again next week.
4 Tips on How to Get Better at Calculating Profit & Loss Statements
- Calculate your gross margin and profit margins.
- Know your breakeven point, which is the point at which you can break even by selling the same volume of product or service over a specified time period.
- Understand what marketing expenses are considered fixed versus variable costs.
- Prepare an income statement to see how profitable your business has been over the past month, quarter or year so that you know how much money is coming in vs how much money is going out to find out if your business is operating profitably.
- Figure out your cash flow by keeping track of all the inflows (income) and outflows (expenses) from the company.
- Prepare a cash flow projection, which predicts future events such as expected sales levels, when money will be needed to purchase inventory or pay off loans etc., and helps you determine whether enough funds will be available when needed to maintain operations.
5 Ways to Enhance Budgeting Skills in your Firm
Your accounting, marketing and HR skills are essential to your company’s success, but don’t neglect the importance of budgeting. A well-planned budget can help you stay on track and avoid overspending. There are a number of ways to get started:
1) Calculate your fixed costs – these are expenses that don’t change no matter how much business you do. Fixed costs include rent or mortgage payments, insurance premiums, and utilities.
2) Add up all the items that make up your variable cost – these are typically proportionate to how much work you’re doing or what kind of products or services you’re providing.
3) Calculate the difference between your fixed costs and your variable cost. The difference is the amount of money you need in order to break even. If you have more than enough cash on hand, then congratulations! You’re in good shape! The trick is to maintain a surplus so that when things go wrong (like an unexpected illness), you have enough money in reserve to cover it.
4) Evaluate whether there’s anything holding back growth in your business – if not, continue with the above steps until either your fixed costs rise significantly or one of your variable costs shoots up drastically. Once this happens, it might be time to downsize by cutting back hours or staff members rather than continuing down this road any longer.
6 Questions Every Small Business Owner Should Ask Their Accountant
- Do you provide accounting services to small businesses like mine?
- What other services do you offer?
- Can you help me set up my books and make sure I’m doing everything right?
- What are your fees? Will they be monthly, quarterly, or annually?
- How much time will it take to set up my books so that I can operate without your help moving forward? 2 hours a month or 5 hours a year? Should you have this work done by someone who knows what they’re doing or not at all? 6. What type of experience do you have in helping people with bookkeeping tasks? 7. Are there any particular types of tax returns that I should expect from an accountant? 8. If I need to get in touch with somebody at the office, how would I go about doing this?