The Unaccounted Opportunity Cost In Small Food Business Ownership

This is one cost that is rarely considered when starting a business. Ask yourself what else you might be doing with our time and money. And weight that answer against what is motivating you to start your own business. Good article for any aspiring business owner.

Small Food Business

opportunity cost small businessIf you’re not familiar with the concept, opportunity cost is the difference in gains between one chosen path and another untaken path.  For example, when you decide to go into business full-time for yourself, your opportunity cost is the income you would have earned working for someone else.   Every decision you make has an opportunity cost, for example, if you decided to continue working for someone else then your opportunity cost would be what you could have made starting up your own business.    But there’s another form of opportunity cost that most start-up entrepreneurs don’t take into account.

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Seven Business Problems

Business problems

Photo (CC), on Flickr

Content contributed by Lisa Wedin, University of Alaska Extension

In the book Streetwise Finance and Accounting for Entrepreneurs Suzanne Caplan discusses seven problems that can threaten a business. There are many difficulties associated with running a business. It can be difficult to tell what is a problem and what might just be a bump in road. Here are seven red flags that you can remedy and strengthen your business.

1. No Growth: Flat growth in revenue can mean lost volume. Costs are rising so your revenue needs to meet or exceed those direct costs. Periods of no growth are part of the business cycle. You may need to start an aggressive sales and marketing campaign. Price cuts are usually not a good way to do this since the goal is to make a profit.

2. Low Productivity: It is much easier to determine your productivity if you are measuring it. There is technology available like your accounting software, contract management software, and other tools. You could find that you are overstaffed, you are experiencing equipment failure, or your team has poor moral.

3. Loss of Market: A good rule of thumb when you are building your business it to try to make sure that a single client does not represent over 25% of your total sales volume. If you have some large clients, it is important to limit your permanent overhead. Some other things to keep an eye on are changes in your industry and if orders and payments or slow in coming.

4. Unpaid Taxes: Unpaid taxes are a huge problem. Do not borrow from any taxing body even as a last resort. There are penalties and even criminal sanctions can be applied.

5. Deteriorating Capital Base: If you are in a situation of flat or negative cash flow, you may get to the point where you are not generating enough revenue to make all your necessary payments. Look at you pro-forma statement and see if it makes sense from an investment perspective to bring in an outside investor or additional owner equity. Another alternative is to liquidate some assets.

6. Pricing Pressure from New Company: New companies often have aggressive pricing strategies. Customers will often try the less expensive upstart. It can make the situation worse if the competition has newer, faster, and lower cost technology. Price cutting can be a dangerous strategy in this situation. It may be a better choice to reposition your business with a new twist. Service and quality are valued too.

7. Lack of Strategic Planning: Business is always changing. It is important to understand the current situation your business is in as well as keeping an eye out for future opportunities. As soon as you achieve your current goals, you need to set new ones. Creating a business plan for any new idea is a great place to start.

Being There for Your Customer – Location and Hours

Know your customerAre you where your customer is? And are you there when they need you?

You may think this is another push for ecommerce and being online and that certainly fits. However all stores, traditional and online, need to think where their customers are and are open when the customer needs service.

Think about where you shop. For example, my grocery shopping is driven by where is the closest store. Unless you provide me, as a consumer, a reason to come to a different store, consumers tend to take the easiest route.

Yet probably an even more important part of “being there for your customer” is driven by the hours you are open. Most of your customer base works from 8 or 9 to 5. Yet how many times has your service department informed a customer that they will be there sometime during those hours. It happened to me just last week. So my choice is forgo the repair, probably not an option, or take a day of vacation.

Look at how many businesses have changed. I can go to my bank from 7 am to 6 pm M-F and Saturday morning. My dentist has similar hours. Getting my haircut can be done 11 hours a day, seven days a week. And I have located an appliance repair shop that does evening house calls for no extra charge. And the list goes on.

This issue of “being there for your customer” begins with understanding who the customer is. The understanding though must include what they want. If I am your customer and like your product or service, I may find a way to continue our relationship. But it may not indicate I am fully satisfied. If a competitor offers something better, I may just give them a try. And if I like what they do and when they do it, you may have lost a customer and not even know why.

So how do you get an understanding of what I want? First, look at your own patterns. You are a customer for goods and services. What makes you happy when you keeping your own business open.

Also, just ask. A one-question survey can slowly gather data and not be considered intrusive. Maybe just run the survey for a week. And leave time between each survey.

Customers lead busy lives. The more you can help them keep control, the more you have gained loyalty and a voice for your business.

Small Business Saturday 2013 – Nov 30th – It’s Time for Action!!

Small Business Saturday logo

Small Business Saturday

As I was getting ready to write this article, I noticed an article that discussed K-Mart was opening at 6 am on Thursday for Black Friday. The day before I read about many more stores opening at 8 pm on Thanksgiving.

Can a small business owner compete and, if so, how? You can and you should. Last year, an estimated $5.5 billion was spent with small business owners on that one day alone.

First, don’t panic. You still have time to get ready. Small businesses have had competition for years and many of them have found ways to stay in business and grow.

That said, you do need to make some plans. Are there some specials you want to focus on that day? Some business owners are working together in a cooperative effort. I have read that some are focusing on making the day a mini-party, celebrating who they are and treating their customers to maybe hot apple cider and a treat. What is the story or message you want to sell. Certainly part of it is joining into the national effort. Free materials are available online. Just search the term “small business Saturday.”

This is a great time to use social media. Send regular messages through the social media you use. If you haven’t started an online marketing effort yet, maybe now is the time. There will be lots of press about this event. Connect with it. Engage in the conversations. Start building your brand and reputation.

Engage your customers to provide their stories. Get permission from those customers who have sent you a thank-you to use their words, pictures and maybe video in your efforts. Nothing sells as well as loyal ambassadors.

And as you work on your own business, contact other small business owners. Become your local champion for this effort. Take pride in who you are. Small businesses remain a key element in our economy.

The last thing on your list of things to do is start getting ready for Small Business Saturday 2014. Don’t make this a one-time event but the culmination of a year-long effort. Remember, successful businesses are not in a sprint. They recognize that starting, growing and maintaining is a marathon, or even more like a steeple chase with hurdles, water jumps, and uneven terrain.

Small Business Saturday is coming. Make it a great day for visibility, awareness, and sales for you and others like yourself.