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Too busy? Not busy enough? What's right for you?
The basic rules of thumb are:
.If you have too much work, it's time to raise your prices.
.If you have too little work, it's time to do more marketing.
The question of how to grow your business is more complicated.
Some entrepreneurs want to grow their business and hire help. Others
prefer to work independently and perhaps use contractors for specific
projects.
You'll handle peaks and valleys in work volume differently depending on
whether your primary goal is growth or independence.
There are a number of ways to smooth out the peaks and valleys in your
work volume.
First, by looking back over prior experience, you can assess whether there
is a busy season and a slow season related to the time of year.
Plan for the busy/slow season.
If your slow periods are seasonal, you can plan ahead. You can reserve
cash for the slow periods and make a plan to use the time productively.
You can probably map out a list of activities that get dropped when the
schedule gets busy.
This is the time to schedule activities such as training, upgrading the
computer system, or traveling.
Assess business cycle/economic climate impact.
If your slow/busy periods are not seasonal, assess what economic factors
influence your business. For instance, increasing interest rates directly
impact businesses related to construction and housing.
It's important to understand what factors in the business cycle and economic
climate affect your business so that you can foresee whether business is
likely to increase or decrease, and plan accordingly.
Continue marketing.
Sometimes slow periods result from a lack of marketing. It's important to
continue to market your business and not allow all resources to be consumed
by a big project or client.
It's not unusual for businesses to experience slow periods. It's important
to have an ongoing marketing program so that your business isn't dependent
on just a few clients.
Growth
For the growth-oriented entrepreneur, the question becomes how and when
to hire. Should you hire a support person to help with administrative work
and bookkeeping? Or should you hire someone with your same skills or specific
skills such as sales, marketing, financial, computer, or other skills that
fill the gaps in your operations?
Who you hire is a difficult decision. Hiring someone requires your investing
in training and supervising that person's work. (For more information on
hiring, see the previous eNews called 'Hiring - Clone Yourself?')
Don't assume that growth (higher volume of business) automatically results
in higher profits. It's possible to grow the revenue of a business -- take
on more projects, manage more people -- and actually become LESS profitable.
This happens all the time to builders who get strung out across too many
houses and find they really made more money building houses one or two at
a time, and certainly had fewer headaches.
The decision to hire employees adds cost, complexity and overhead to your
business. Meeting payroll is difficult at slow times. The alternative to
not covering payroll - layoffs - is painful to all.
Once you have a payroll to meet, you need to have a continuous pipeline
of projects to keep the revenues coming in. This may put you in a position
of having to accept less attractive/less profitable work in order to cover
the overhead.
For the independence-oriented entrepreneur who really doesn't want to deal
with employees, the question becomes, 'How can I become more selective in
my projects so that I can continue to grow, increase profits and develop
in my chosen field?' This is the path chosen by many entrepreneurs who
are fleeing the corporate bureaucracy and really don't want to build an
organization and manage people.
During 'peak' times, you can raise your prices and choose your projects.
Always be mindful of future valleys, and maintain a broad base of clients & projects
so that you are not at the mercy of one or a couple of clients canceling.
It's always good business practice to plan for the peaks and the valleys,
so that you deliver quality work during 'peak' times and have a portfolio
of clients to carry you through the 'valleys'.
In conclusion, deciding how or if you want to grow your business is a critical
question. There are pros and cons to any approach. It's a personal choice
and your plans should be based on what's important to you - not some stereotype
that growth is good.
Jean D. Sifleet
Attorney & CPA
P.S. My thanks to the members of the Womens Business Network (WBN) of Harvard,
Massachusetts who shared their experiences with me at their meeting of May
11, 2000.
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Jean Sifleet, business attorney, CPA and three-time entrepreneur, is pleased to announce the release of her new book, Advantage “IP”: Profit from Your Great Ideas. Visit the Smartfast Bookstore for details, and to order the book. |
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