The journey from an idea in the basement to a real thriving business is a long one. Whether you succeed or fail will depend on several things, including your grip on business basics. While many aspiring entrepreneurs realize the effort necessary to build something recognizable, they might not bother with the foundational aspects of business management. However, realize that big wins are just a by-product of working on the basics. This post highlights the key business areas you need to develop or improve so you can succeed in your day-to-day operations.
Business 101: Going Back to The Business Basics
Before starting a business, make sure you have some knowledge of:
1. Strategic Planning
One of the essential business basics is to avoid seeking the perfect strategy. You can spend a lot of time wordsmithing a purpose and shuffling goals, but there’s no such thing as a one-size-fits-all plan. Instead, spend time on critical elements that will help you make profitable business decisions.
The strategic plans of most successful businesses include the following elements:
Goals and Actions
Setting SMART goals is business 101. Taking this approach to goal setting brings structure and clarity to your objectives. Rather than relying on vague statements, SMART goals help create measurable trajectories towards specific objectives, with calculated milestones and an estimation of their attainability.
For instance, it’s not just enough to say you’ll grow your productivity in 2020. How will this be measured? What steps will be taken? A better goal could be something like, “We’ll improve our productivity by 20% by upgrading our project management tool within three months.”
Mission and Vision Statements
Your mission is the summary of your core aspirations, aims, and purpose. Your vision, meanwhile, is the foundation of all your planning activities.
For example, Shopify’s mission is to make commerce better for everyone. And its vision has spurred the growth of solutions like Oberlo (makes it convenient for Shopify store owners to import and dropship products) and Exchange (allows entrepreneurs to buy and sell Shopify websites).
Conduct a SWOT analysis to discover your strengths, weaknesses, opportunities, and threats. When you’re analyzing the competition or evaluating a marketing strategy, you could turn to the results of your SWOT to help inform your future direction.
Having some knowledge of accounting and booking is essential to improving your business basics. The easiest way to track whether you’re profitable or operating at a loss is to use an accounting app like Xero or QuickBooks Online. These solutions let you submit invoices, track deposits, and payouts, and streamline tax preparation. You can also use them to generate reports like a cash flow statement, balance sheet, and income statements. Here’s what each of them is useful for.
Cash flow statement is simply a statement showing the flow of cash out of and into your business during a specific period.
Balance sheet is an essential report that highlights the assets, liabilities, and equities of a business at a given period.
Income statements are profit-and-loss or monthly, quarterly, and annual income statements that reveal the financial condition of a business.
You do have the option to hire a freelance accountant to handle the majority of your work, but the task of bookkeeping where you track and record your day-to-day transactions will most likely still fall upon your shoulders. As such, it’s much more convenient to use an accounting tool to keep careful records of both your costs and your income. Plus, you’ll be able to avoid the common accounting errors that first-time entrepreneurs make.
Business Basics of Taxes
If you’re planning to start a small business, you’ll most likely see your business income pass through to your personal return. However, the money isn’t going to count as a deduction until you issue a check at the end of the financial year.
That being said, the income you generate might be subject to additional self-employment taxes. Get in touch with a tax professional to learn how much you should set aside from your income. When it comes to sales tax, don’t rely on the internet to determine if you should collect it and how much. Instead, seek answers from an actual authority, like the IRS in the US or the Canada Revenue Agency.
3. Financial Management
Finance may not be your area of strength, but having a solid understanding of financial business basics can help you avoid unforeseen debt. Knowing the state of your financial health is also a great way to ensure you have enough money to invest in and grow your business. Below are some of the techniques that many entrepreneurs use to manage their business finances.
Pay Yourself First
This action doesn’t mean taking home all the profit the moment you cross break-even. Start with 5% of the earnings and then gradually increase your salary as the profits soar. This step is an excellent way to set money aside while keeping a safety net for unexpected expenses.
Separate your Personal and Business Finances
Doing so will ensure that your assets remain protected. Also, it’ll become easier to manage your bookkeeping and tax obligations. One way to separate your personal and business finances is to get a business credit card and make all business transactions through it. This separation will help you track your expenses and also keep you in control.
Get a Handle on Bookkeeping
Make it a habit to consistently review and track your books, even if you’re not handling them directly. Bookkeeping will enable you to become familiar with the current financial standing of your business. Keep an eye on those smaller expenses as they can add up quickly.
Getting ahead gives you the necessary time to seek funds, decide where to cut or invest, and other vital behaviors. Although business owners can’t foresee everything, predicting and meeting future needs is a savvy financial management tactic. Make cash flow projections based on existing year revenues, then anticipate your company’s requirements for the upcoming year.
Understand Your Funding Options
If seeking funding is in your near future, take time to determine your best source based on the options available. Here are some of the top funding options for businesses.
- SBA Loans: Guaranteed by the US government, SBA loans enable you to get funding with lower interest rates and longer repayment plans.
- Friends and Family: It’s okay to seek help from someone you know, but make sure they’re aware of the risks.
- Crowdfunding: Sites like Kickstarter will get your business in front of potential investors who’re willing to contribute in smaller amounts.
The goal of marketing is to connect your business with the right customer base. It’s a necessary tactic for any business, and most companies would not have the success they enjoy today without marketing. The business basics of marketing involve:
Your market research can be as simple as sending questionnaires to potential customers. Pain points, demographics, and buying preferences should be reviewed to identify bottlenecks and opportunities quickly.
Since most aspiring entrepreneurs don’t have unlimited resources to gear towards marketing, you’re better off concentrating your efforts on a few key customer segments. For example, you can narrow your target audience to include only people in a specific geographic area. Or, you can run a campaign targeting only those most likely to buy your product or service.
Marketing can be challenging to execute without proper branding. When campaigns stop at making a company’s product more desirable than its competitors, branding goes a step further to try and form an emotional bond with the customer. As such, a strong brand can help you stand out in the market.
There are several ways to create a memorable brand, but one of the business basics is to start with a logo. You can create a professional logo in Photoshop or use a free logo generator to create one for your business.
Gone are the days when television commercials and print advertising were necessary to get ahead of your competitors. Today, you can choose from a variety of digital tools to spread the word about your business. Present your products and brand favorably by making use of the following tools.
Facebook is probably the most important social media platform for your business. You can use it to share updates, resolve queries, promote products, and build communities around your brand.
Google My Business allows you to gain a presence in Google Maps and Search. Creating a profile there will give potential customers easy access to your phone number, business address, directions, and website – at no cost to you.
YouTube lets you showcase your brand’s personality through engaging video content. Use it to showcase your products in action, share behind-the-scenes footage of your events, and give DIY solutions to customer’s problems.
Blogging offers a way to establish your presence in search engines like Google and Bing through using specific keywords.
Email marketing enables you to offer something compelling to your subscribers. Potential options include a product discount, a free ebook, or a free trial of a digital service.
5. Mergers & Acquisitions
Both mergers and acquisitions can help to increase the range of your company’s offerings. Mergers happen when two companies that are almost equal in earnings and size agree to combine their operations to expand their reach. However, mergers are an unlikely sight because it’s challenging for two businesses with different values to function as a single unit.
Unlike mergers, acquisitions involve the outright purchase of another business. The process involves conducting a business valuation to get an idea of the other business’s value before a sale is agreed upon. This is also what you’ll need to do should you decide to sell your business.
Online businesses are easier to acquire since everything from the purchase to the transfer of ownership happens over the internet. For example, Exchange connects with hundreds of entrepreneurs who’re looking to sell their ecommerce businesses. If you decide to invest in a particular company, you can get the domain, website, content, and everything else transferred to your name online.
Of course, you should still conduct due diligence before purchasing an online business. Here are some of the things to consider:
- Traffic: Is it mostly organic or the result of paid ads? The answer will determine whether or not it will be profitable for you to invest in the business. For example, you’ll need a budget for Facebook ads if that’s primarily how the company gets traffic.
- Reason for sale: Dig deep to discover why the seller has listed the business for sale. Business basics tell us that if a person doesn’t have a solid reason for selling their business, there’s probably an issue with their business model.
- Opportunities for growth: Investing in a high-potential website is business 101, so you should evaluate whether the company will present you with enough opportunities to grow. For instance, a site that isn't optimized for SEO could be just the perfect asset to acquire.
How to Learn Business Basics
You can learn them on your own or by taking a university business basics course.
If you go with the first option, you can read and bookmark articles like this one to gain knowledge of business. You can also read a business basics book to satisfy your appetite for learning. If you’re looking for recommendations, we suggest reading:
- Fundamentals by Jim Sullivan
- 5 Dysfunctions of a Team by Patrick Lencioni
- The Personal MBA by Josh Kaufman and Worldly Wisdom Ventures LLC
Alternatively, you can go for a university-taught online course. The following are some of the best business basics courses for entrepreneurs.
- Management Essentials from Harvard University
- Certificate in Business Administration from York University
- Business Fundamentals from Algonquin College
When it comes to business, the pressure to succeed can push you in several directions: in social media lies the growth, in market segmentation lies the answer. Start somewhere. While there is nothing wrong with taking action, it’s always good to take a step back and reassert yourself why you want to start a business. Going back to business basics isn’t a step back. Instead, it’s a step forward towards reconnecting with your purpose and learning what it takes to set up a solid foundation for your company. In simple words, it’s a recipe for getting ahead.