When it comes to running a business, there’s always more to learn — and a recent half-day conference presented by Pasco-Hernando Score aimed to give business operators more tools to help them succeed.
The free conference, “Game-Changing Tactics for Small Businesses,” featured speakers tackling such topics as “Keeping Your Eye on the Money is a Winning Strategy,” “The Best Defense is a Good Offense,” “Score a Touchdown Using YouTube,” and “Set Your Goals and Objectives to Win.”
Jim Hammond, a mentor and executive board member for Chapter 439 of SCORE, offered practical advice to help businesses lay the foundation for continued growth.
“The key items in a business of any size are not the product and not the service,” Hammond told those gathered at the Residence Inn Marriott, in Lutz. “The key items are the people, the capital, and most importantly, the vision of the CEO. If the owner/CEO does not have the vision of where this business is going, it’s not going to grow.
“It’s not the products or services. Why do I say that? Because over some extended period of time, I guarantee you, all of the products and all of the services are going to change,” said Hammond, who was the CEO of a software business for 20 years.
“We went through five complete product changes,” he said, noting his company had to write new software from scratch. “The old stuff wasn’t any good.”
Being able to navigate change is critical, and it’s important to be thinking ahead, he said.
“All businesses run out of growth. You hit a plateau.
“If you don’t do something, if you don’t have a vision, it will start to tail off. It doesn’t matter what the business is,” Hammond said.
Cash flow and good personnel are key
“In my world, the No. 1 financial statement is: Cash flow forecast,” Hammond said.
“If you’re out of cash, you’re out of business. That’s how important it is,” he emphasized.
Maintaining a revenue stream is critical.
“You, as the CEO, are the No. 1 person in charge of sales, marketing and planning,” Hammond said.
“What did you sell today? How much revenue did you generate today? We don’t have time to be fooling with things that aren’t generating revenue. Prime time, you’ve got to generate revenue,” he said.
It’s also essential to be thinking of new ways to increase the amount of money the business brings in, he said. That could be achieved by adding a product line or service, bringing in a new employee, acquiring equity partners or through business acquisitions, he said.
As CEO of the software company, he met annually with his top staff, and they reviewed each department asking: “What were they going to do to help generate additional revenue for the company, provide services and so forth.”
Besides creating new revenue streams, companies need to keep a close eye on costs, he said.
“Businesses need actionable information. If I don’t have a budget, these numbers (profit and loss) mean nothing,” he said.
For example, if a company’s budget is $2 million and its revenues are just $700,000, the result would be a disaster, he said.
“Every business needs not just financial statements, but a budget.
“We need a budget for the month, for the quarter, for the year.
“And then, we can start measuring: How are we doing?
“We don’t want surprises.
“The only time I like surprises? Christmas and my birthday,” Hammond said.
He also urged businesses to work hard to reduce costs: It makes it easier to share profits with employees.
“If you can find a way to buy the same widget, for half the price, 20 percent off or whatever, go do it,” he said. “Sometimes we get sloppy on the expense side.
“A dollar’s worth of cost reduction can be worth $2 or more of income. It’s hard to get another $100,000 in income. It might be a whole lot easier to reduce $50,000 in expenses,” he said.
Stay on top of finances
“You need by the 10th of the month, your previous month’s financials.
“Why? Because they’re fresh.
“Why? Because on the last day of the month, when someone has entered in all of the cash receipts, paid all the bills — nothing changes.
“By the 10th of month, there’s no reason they can’t print up a report. Here’s your financials for the month,” he said.
Businesses have good months and bad months, that’s how business goes, he said. But, it’s important to always have a pulse on current conditions.
“I run a business. I want to at least weekly log into my bank account, know how to do it, and run down the list of what’s in the bank account. If something big pops out that I don’t recognize, I can start asking questions.
“I’m big on internal controls. Why is that? Because the more you bulk up your business, the more issues and more security you need to think about.
“Make sure that all of your checks and all of your invoices that you send out are numbered and stored somewhere safe,” he said.
It’s also important to have cash available, in case of emergencies or an unexpected downturn.
“A reasonably healthy business, the minimum should be three to four months’ worth of all expenses, cash in the bank, plus any one big-time item,” Hammond said. “That, to me, is a pretty comfortable place to be.”
After cash flow, the next most important thing is having good people, Hammond said.
“Getting and keeping good employees is very important. It’s important for all businesses. It’s especially important for small businesses because you don’t have extras,” he said.
If a company wants to grow, it generally needs to add employees, he said, noting it’s difficult for a company with just a couple of employees to hit the $1 million mark.
When adding staff, however, “revenue per employee is a key metric,” he said.
“You’re not going to grow unless you can increase your revenue per FTE (full-time employee),” Hammond said.
Pasco-Hernando Score offers a wide variety of free workshops and mentoring services to small businesses. To find out more, visit PascoHernando.score.org.
Published September 26, 2018