Operations: Get up and running
Planning and finances are important, but your day-to-day business operations define who you are and what you do. Before you open your doors, work out all the systems and processes you need to compete and succeed.
As unique as your idea
More than anything else, your operational needs will depend on the type of business you're launching. Here are some areas to consider:
Location. Unless you're home-based, choosing the right location can be critical. A retail business should be near high numbers of your prospective customers. Pick a neighborhood that's inviting and has enough amenities such as parking. It helps to be near complementary businesses as well. Learn the history of any potential locations to avoid those with potential issues that don't fit your business. Finally, know your neighbors: You don't want to open a yoga studio next to a woodworking shop because of the noise, for instance. For a professional service, wholesale, or manufacturing company, make sure your location can do everything you want it to do. Considerations might include space for machinery, packing and shipping, storage, power, heating and cooling, or a loading dock. Keep in mind that most commercial leases run from three to five years, so if you plan to grow rapidly, consider renting more space than you initially need.
Equipment. If your venture requires major equipment, consider leasing rather than purchasing to conserve cash and see how a particular option meets your needs. You might also be able to share equipment, such as an under-used commercial kitchen in a church or community center.
Technology. Managing your own technology might seem sensible if you have the skills. But outsourcing IT responsibilities to a professional might actually be more cost-effective, particularly if you have significant technology needs. Think about not just hardware and software setup but network security, data backup, mobile access, and around-the-clock support. Then consider the time you'll get back to focus on other priorities.
Stakeholders. The vendors, suppliers, or distributors you work with can help you succeed — but can also increase your risk and liability. Cost is always important, but consider quality, reliability, and stability as well. Take extra time vetting any business you'll be depending on, and pay close attention to how open they are during the process. Also, keep in mind that an experienced vendor can be a valuable resource for advice.
Insurance. Work with a professional who understands small business to secure the appropriate insurance coverage, for things such as liability, business property, vehicles, workers' compensation, or specialized needs. Talk to your insurance agent, or contact Wells Fargo Insurance for help.
Employees. It's often said that people are your greatest competitive asset, but managing them can be a job in itself. Consider hiring on a contract basis at first, both to find out who fits the job well and to reduce administration. If you're hiring employees, save time and avoid potential liability issues by trusting payroll chores to a specialized provider.
Control your cash flow
Most of these operational needs require cash. You’ll want to manage this precious resource as efficiently as possible. The key is to minimize your “burn rate” by keeping overhead as low as possible and questioning every expense. Here are four key areas to monitor:
Watch your outflows. Track every penny. Using a business credit card for monthly bills and everyday expenses can help you track spending and preserve your cash on hand. Moreover, if you take advantage of an available rewards program, you can use accumulated points toward other business purchases — helping you spend even less cash.
Monitor your costs. Make sure you understand how often your inventory turns, and what are the bestsellers and the worst-sellers. Look for opportunities to ship products straight from your vendors to your customers.
Keep an eye on inflows. On the other side of the ledger, ask, “How soon are my customers paying me?” Then decide when you need them to pay you. Offer incentives for advanced or early payment. Send invoices immediately, make sure they are received, and ensure they’re paid on time. If the check doesn’t arrive, call and ask, “When can I expect payment?”
Challenge everything. Are you getting value from every vendor and revenue from each product or service? Can you negotiate different terms, or otherwise lower the cost of doing business? Are there expenses you can cut without affecting profitability?
New employee and payroll tips
Register with your state’s new hire reporting program. Federal and state laws require businesses to register new employees within a short time of their hire date.
Learn about your employment-tax responsibilities. Some new business owners are surprised that they share in the payment of employment-related taxes and may be required to carry disability insurance. Find out from your state what your tax responsibilities are, including county, city, and municipality taxes.
Secure Workers' Compensation insurance, whether through your insurance provider or a state program.
Be prepared to fund your payroll.
Be ready to prepare and file tax-related forms and make deposits to the IRS.
Hire talent, not staff
Bringing on new talent doesn’t necessarily mean hiring employees anymore. Individual professionals and service firms can deliver a wide range of services on a retainer or as-needed basis. Thanks to the internet, your potential talent pool is a global one. Here are options to get more for your money, ensure flexibility, and boost your “bench strength:”
IT needs, including both professional help and "cloud" computing, storage, and connectivity services.
HR providers for payroll or benefits, as well as full-service organizations that take on the entire employer relationship.
Marketing and sales specialists such as strategists, designers, advertising brokers, and commissioned sales reps.
Action steps: Avoid four small business blunders
To manage your business operations well, watch out for these common mistakes:
Going at it alone. Besides your business partner or spouse, include at least three other people in your decision-making: an attorney, a CPA, and a financial advisor or banker.
Wearing all the hats. Responsibilities such as bookkeeping, taxes, and payroll take up precious time, and getting them wrong could be risky. Hire professionals to avoid effort and costly mistakes.
Keeping your head down. Focus and dedication are watchwords for the successful entrepreneur, but make time for research, planning, networking, and simply thinking about the big picture.
Running lean. It’s often difficult to do so, but small businesses should have at least three months of cash in reserve. Think of it as an insurance policy.