Managing Your Business: Targets, Analysis, and business health
Next up in our series on entrepreneurship for young people is managing your business!
After considering all of the preparation in our previous articles and having launched your business, it's now time to take the necessary steps to ensure you are keeping on track and meeting your goals in your business.
If you haven't checked out our previous articles, now would be a perfect time to do so, to get caught up with all the previous steps it takes to launch your business and become an entrepreneur in Cumbria!
As always with our guides there will be a number of principles we will cover when managing your business, this includes finances and sales targets, SWOT and PEST analysis, and maintaining your business health (and more importantly your personal health) when managing your business.
Finances and sales targets
Finances and sales targets can seem very overwhelming at first, especially if you haven't dealt with managing money before. However, the process can be relatively straightforward once you overcome the psychological hurdle of dealing with money.
Firstly, to have any sales targets you need to complete two financial documents to support your business. These are a cash flow forecast and a profit and loss document.
These two documents together help you to understand and monitor your business's health from a financial standpoint. It's important to remember financial health is only one aspect of your overall business health.
The cash flow forecast allows you to view your business's income and expenditure in an estimation type manner, projecting what you estimate your business will earn through one year using previous information to inform your estimation.
If you have no previous information as you have just launched your business for the first time, it will take some time to build up a ‘feel’ for your business's income and expenditure.
The most important rule above all is to keep your receipts and invoices on hand should you need to track your finances from the ground up.
The profit and loss document allows you to monitor your business's finances in a real-time manner.
Whenever you make a sale, you should put this into this document and likewise when you make a business purchase, you should put this into this document too. This then provides an overview of the total profits you have made.
It can also be a good idea to break this down into monthly assessments, taking a profit and loss account every month your business is active.
From this, you can then begin to break down the sales targets you would like to reach in your business. For example, if you have an expenditure of £100 per month, you know that you need to sell £100 worth of products or services to ‘break even’ and pay off your expenditure.
Therefore, you also now know that you need to sell £110 worth of products and services to make a £10 profit and so on.
To summarize, your business's sales targets will be specific to your business and no one else's. Therefore, you should make sales targets accordingly and don't try to copy or emulate anyone else's financial targets.
Take into consideration the money you have going out every month and the amount of money you want to come in to support your business.
Lastly, if you want to be able to make a living from your business, you should take the living wage for the tax year you are operating and include this in your sales targets to be able to pay yourself a wage and pay for your rent and living expenses.
SWOT and PEST analysis
SWOT and PEST analysis is a model form of analysis that allows you to seek a deeper understanding of your business. Again, this analysis can be conducted monthly to keep a close eye on the state of your business.
SWOT stands for:
Within this matrix, you should write down the current strengths of your business, anything you are great at that no one else is, any achievements you have attained, and, any assets you have that help in managing your business such as an accountant or a lawyer.
Next, you should write down the weaknesses of your business. Any areas you think need improving or something which stopped your business from growing in the previous month.
In the opportunities section, you should write down any opportunities your business has for growth, such as attending an entrepreneur event or a new market that you would like to introduce your products or services to.
Lastly, in the threats section, you should write down any threats that would stop the growth of your business such as a very obvious one, Covid-19.
From this, you can begin to break down where your business is at its peak and where your business needs to be improved and then this can provide you with goals for your business for your next month of management. Next, we have PEST.
PEST stands for:
Here you should consider any outside elements that aren't in your control that affect your business within these four categories.
For example, economic crises are going to affect your jewellery business because this means your target market may have less disposable income to spend on your products.
As well as this, if you run a taxi business, the current rise in gas prices will drastically affect your profit as you will be spending more money on fuel.
Then you can begin to introduce measures to mitigate these issues and you can begin to strategise as to how your ,business can overcome challenges in the current political, economic, social, and technological environment that it finds itself in.
Maintaining business health
The last element to managing your business is to monitor your business health. One method of doing this is to monitor your business's financial health, as mentioned above.
This can provide one angle of criteria to assess the health of your business but it's important to remember that money is not the only indicator of business health.
Another criterion many entrepreneurs use to assess their business health is their customer satisfaction rate and this is directly linked to customer service and loosely tied to branding (which we will talk about in an upcoming article).
This is because customer satisfaction can dramatically affect the future of your business. If someone has a bad experience while doing business with you, be it a customer or another stakeholder, they are going to remember that and associate that bad experience with your brand.
First impressions count and the more positive experiences you can give your customers the more likely they are to come back and do business with you and even better they are more likely to tell others about your business, bringing in more sales and increased profits.
Repairing a brand can take a long time and is something PR experts regularly deal with.
How many of us remember when KFC ran out of chicken and still talk about it? Or who remembers when gaming company Blizzard was outed for wrongful workplace behaviour?
People remember these things and not just for big businesses, but for small businesses too, and for small businesses this can be devastating.
However, the most important indicator of business health is your own personal health. You can't operate your business if you can operate yourself and don't let anyone tell you otherwise.
If you aren't in adequate health to manage the day-to-day operations of your business then your business will definitely suffer in the long term. Therefore, it is important to remember to take care of yourself and take time out for self-care where necessary.
There is a very fine line between workaholic and negative mental health.
Once you've launched your business, it can be all fun and games and you can easily get lost in the excitement of it all. However, careful monitoring of your business's finances, outside challenges and your own mental health can be cruical in looking after the future of your business.
Make sure you spend the time to access your business goals and reflect on whether or not you are on your way to reaching them. But, also remember to spend the time looking after yourself and your business will thank you for it later.
In part IIIII we’ll be talking more about running and managing your business with branding, marketing plans, and more.
If you would like any more advice on starting a business, let us know in the comments also and we’ll cover it in another article.
- Joshua R F Murphy: https://joshuarfmurphy.com/ Having launched several businesses and engaging in an enterprise placement year where I won quarter-finalist in the Santander Young Entrepreneur Awards, I have gained a deep knowledge of business development and entrepreneurship and now manage my own music management business “Joshua R F Murphy”
Psst, we're out here fighting for change.
Have you ever wanted more from Cumbria? Let us know your thoughts so we can do more to make Cumbria a better place.
Check out our Google Forms survey here: https://forms.gle/Ppj3iNrUq9VeQQN77