2006 is off to a fast start with a new minimum wage, new parking rates downtown and expectations of another strong year for Whatcom County businesses. 2005 saw more than expected growth, lower unemployment and increased sales for many businesses. Some local businesses had record years in both sales and profits. Construction continued to drive our economy with manufacturing, services and retail sales all showing strong growth. Optimism is still high for 2006, but a little more guarded as interest rates rise, housing starts slacken and businesses cope with hiring challenges and wage pressures. Whatcom County has had the luxury of a strong economic base for a number of years and retail sales over the holidays seemed to exceed expectations. With the new year comes time for new beginnings and opportunities for new ventures while also reflecting on what accomplishments happened in 2005. Most business owners don’t have time to get beyond their day-to-day crisis management of their businesses, but planning time is often the most critical of all owner / manager functions. Start the new year off right with a few business resolutions:
Resolve to develop a budget for 2006: Use your 2005 actual revenue and expenses to project what your profits or losses will be this coming year. What are your cash needs in the coming year? Do you need to borrow money or expand your line of credit? Do you have any plans to expand into new markets, new products, add employees, layoff employees, cut back your hours of operation, add new equipment or pay off old debts? What can you afford to do? How much take- home pay do you as the owner need to make next year? What would you do differently in 2006 over last year?
Resolve to clean up your financial controls and reporting systems: One of the biggest problems small businesses face is not having good financial reporting systems in place. Their financial statements are in disarray. They don’t get accurate or timely reports (profit and loss, balance sheets, budget to actual variance reports, etc.). Owners don’t have any confidence in their numbers or they don’t understand the numbers they do get. Consequently, they are managing by the seat of their pants. If you don’t have good, accurate financial statements that you can get in a timely manner, how can you tell how well you are doing or if all your hard work is worth it? Resolve to hire someone to help you get your financial controls and reporting systems in place for the 2006.
Resolve to stop spending money on advertising that doesn’t work: Marketing is a foreign language to many business owners. They know they need to do it to get customers and sales, but they have no idea how to effectively market their businesses. Consequently, many small business owners spend their valuable advertising dollars based on the last advertising salesperson that walked in the door. Others don’t have any marketing budget because they spent it all on Yellow Page ads. Evaluate what works, what doesn’t work and what you aren’t sure works or doesn’t work. Get outside help with writing a marketing plan. Resolve to figure out in 2006 what is the best way to spend your advertising and marketing budget to get the best return.
Resolve to get rid of slow moving inventory: Accountants figure that the average yearly cost of carrying inventory for most businesses is 20% of the cost of inventory per year. This “carrying cost” of inventory includes the cost to finance it, the cost to store it, the cost of damage to it, the cost of counting it, and the cost of shrinkage. Get rid of slow moving or dead inventory by discounting prices, returning it to the manufacturer, have a garage sale for your business, donate it to a charity like the Re Store or other nonprofit, or try to sell it on EBay. Throw it away if it won’t sell. It costs your business money to keep dead inventory. One of the fastest ways to generate cash for your business is to sell your existing inventory, reduce your inventory levels, increase inventory turns and free up cash. Resolve to look at ways to increase your inventory turns in 2006.
Resolve to write a business plan for 2006: A business plan is a road map of where your business is going and how it’s going to get there. It looks at markets, products, competition, pricing, expansion and contraction opportunities and develops projected revenue and expenses (see budgeting above) for your business. The old saying is true, if you don’t plan on where you’re going, you’ll probably end up somewhere you don’t want to be.
Resolve to take better care of yourself: Take a vacation and get away from the business to regenerate and reenergize yourself. Most business owners are so involved in the day-to-day challenges of running their businesses they forget to take care of themselves. Review your personal goals and update those that are outdated or already achieved. Spend some time giving back to our community by volunteering at the food bank or on a nonprofit board. Helping others is one of the best ways to get a different perspective on your business, yourself and your life. Spend some time with your family and loved ones. They are often small business owners’ No. 1 supporters and the least appreciated. Thank them with your time and attention.
Resolve to catch your employees doing things right and providing great service: Employees can make or break your business and most aren’t motivated just by a paycheck in their day to day jobs. They truly want to do a good job for your company and your customers, but they also want to be recognized for the work that they do. Create a work environment that rewards staff for great service, allows mistakes to happen, and is a positive place to work. Most of us spend more time at work than anyplace else in our busy lives. Resolve to make your business the best place to work.
Running a small business isn’t easy and it isn’t without its challenges, but this coming year resolve to making it the better, giving back to others and taking care of yourself. Resolve to spend more time with friends and family and doing those things that are really important to you. You and your business will be the beneficiary. Happy New Year and may 2006 be full of happiness and success.
Tom Dorr is the director of the Small Business Development Center at Western Washington University.