Archives: Business Management
Every day, as entrepreneurs and business owners, we have two focuses. First, we need to take care of day-to-day business to earn money in the present. Second, we need to make sure we have work tomorrow (through business development activities) … so we can continue to earn money in the future. When I check out of my business for a few days, not only do I not earn money today, but my future business also suffers.
In the past few weeks, I had a family emergency that necessitated most of my energy and time. It forced me to focus on the important things in my life – my family, of course – but also the bare essentials my business. While it’s difficult to completely walk away from my business (as I like to joke, my boss is a real tyrant!), I had to make sure I still had work when I emerged from taking care of my family.
During this time, I’ve had to maximize every moment of the day. As my sister commented: “You’re frighteningly efficient.” I’m not sure she meant it as a compliment (probably because I sometimes get impatient with her lack of efficiency), but I take pride in and value efficiency. With greater efficiency, you can get more done in the day. During the time of family focus, that was paramount.
Here are the five things I do during especially busy times to increase efficiency:
- Prioritize self-care
If you’ve ever been a passenger on a commercial jet, you’ve heard the safety presentation “put your own oxygen mask on, before helping others.” In other words, you can best take care of others when you’re taken care of. Taking care of yourself also means that you have the physical resources to work at peak performance.
For me, self-care centers around sleeping well. More than anything else, I feel like I can conquer the world after a good night’s rest. To that end, I avoid rich foods, minimize alcohol consumption, and exercise regularly. For some people, yoga and meditation is the trick.
Exercise is more than just about sleeping well. It clears my head, helps me refocus, and improves my mood. If I feel stressed and overwhelmed, without fail, I feel better after a long walk or run. I have renewed energy to tackle more projects. What felt overwhelming, becomes doable.
- Separate my mind and body
When I stopped cooking for a living, and started consulting work, I was frustrated at how inefficient I had become. I just couldn’t seem to get enough done during the day, especially with client projects. It took me a while to realize that when I cooked for a living, I could multi-task with my mind and body… while my body was cooking (and getting paid!), my mind was thinking about my to-do list. My mind planned out each step of my day, and the order of tasks so that I could maximize efficiency. When my body checked off a task in the kitchen, my mind had already planned out the next step so I could jump right in.
Now that I spend much of my work-time behind a desk, it’s harder to multi-task in this way. I can’t be plotting out my day while building financial projections in Excel… both tasks require my mind. But I still make the most of the times when my body is occupied, and my mind is free. When I’m cooking dinner, folding laundry, running, or working in the garden, I think through client projects and strategize to improve efficiencies. In fact, it was on my run this morning that I came up with this idea for a newsletter article and thought through the outline. When I sat down to write, it took only an hour.
- Understand my rhythms
When I wake up in the morning (and after I’ve had a few cups of coffee), I have the most energy and can work with the greatest clarity. It’s this time that I dedicate to banging out work projects. My energy and productivity wax and wane throughout the day. I try to recognize the “wanes” – and take those times to walk away from desk. Maybe I need to eat something, get some exercise, or just do some mindless project (like enter receipts into QuickBooks). Working when I’m tired or hungry leads to inefficiency and frustration. Sometimes, it’s unavoidable, but for as much as I can, I plan my work around my rhythms.
Perhaps you were expecting some more concrete tips for improving efficiency. For me, it’s mostly a mindset, and a way of operating as noted above. But I can offer you this one tip that is very specific:
- Put your to-do list on a calendar… and turn the reminders on
I know many people prefer a paper list that they can carry around; or even a memo on their phone. But putting your to-do list on your calendar achieves three things:
- It insures that you block out time for even the most mundane tasks.
- It allows you to see your tasks on your phone and computer (assuming the two are synced). If you can’t complete a task on the designated day, you can reschedule it for another day.
- The reminders ensure that you don’t forget.
Are you an efficiency-freak? What do you do? I’m always looking for new ways to be more efficient. Leave a comment here. For every 10 tips I receive from you, dear readers, I will give away (to a random respondent) a copy of one of my books (The Farmer’s Office or The Farmers Market Cookbook.)
Of all the problems of a launching business; explosive sales hardly seems like one of them. Who ever heard of an entrepreneur complain that sales were too great? Particularly for a newly launched business, higher than expected sales can feel like a boon. Your customers like your product, they’re buying and rebuying. All good, right? Continue reading
Google “labor shortage in New England” and you’ll see a long list of articles lamenting what farm and hospitality business owners know too well. A confluence of events has made it harder than ever to find good employees. Rents in Boston are so high that workers on the lower end of the pay-scale can’t afford to live here. Continue reading
When I launched my catering business in 1997, I was starved for work. While I had a clear mission of the kind of events I wanted to do, I also needed to pay the bills. So when a prospective client called asking for tea sandwiches for 60 people, I said, “Sure!” He had called the Four Seasons Hotel who quoted him $12/person; and asked me if I could do it for $6. “No problem,” I said. Continue reading
I received a call the other day from Danielle, a woman I met at workshop I led. She wants to start a private chef business. She reached out to me because she wants to have everything planned out with a clear vision to set herself up for success. Great!
“Opinions are like armpits: everyone has them, and they usually stink.”
When asked my opinion, whether in a casual conversation or through my consulting work, I’m quick to acknowledge that I don’t have all the answers, but I’m happy to offer my recommendations. I encourage entrepreneurs to filter my advice through their own experiences. And it’s generally a good idea to get a second opinion.
Naomi and Reid are thinking about retirement. Sure, they’re still young, in their early 30’s, but they know that if they don’t start socking away some money now, they will never save enough to support themselves in their golden years. Not only that, they want to pay for the kids’ college; it’s what their parents did for them, and they want to be able to do that for their kids too. As farmer/entrepreneurs, this savings will come from the profits in their business.
They launched First Light Farm ten years ago. Initially they just grew and sold vegetables, but they slowly expanded the operations to include chickens for meat and eggs, flowers, and pigs; they planted an orchard so they could sell fruit. They built a farmstand, and grew their CSA membership. By the end of their third year in business, they generated enough profit to support themselves and their young family.
Now, Naomi and Reid need a plan for growth. Organic growth has gotten them this far, but to grow their business bigger, they need to be more strategic. They called me wanting to gain a better understanding of their business and how to grow their business strategically.
We set out in a four step process.
Step 1 – Understand current operations
Before we could even think about how to grow, we reviewed the current state of the business. What products are most profitable? What sales channels are most productive? Is there a gap in the business that could generate more profit?
Naomi and Reid dug deep into their numbers. They evaluated the profitability of their different products – flowers, broiler chickens, eggs and vegetables. They looked at how much revenue they earned from their CSA vs. farmstand; wholesale vs. retail.
After some analysis, they could see that their farmstand, despite earning significant revenue, wasn’t generating much profit, and certainly not enough to support the overhead. Their vegetables were most profitable, and they were actually losing money on the pigs. The flowers earned their keep, but they weren’t huge money makers.
Step 2 – Evaluate Opportunities for Growth
As they thought about growth, they recognized that isn’t just about increasing top-line revenue, it is about bottom-line profits. And growth can come in two ways: growing the core business or expanding into a new enterprise.
Expanding the core business
For Naomi and Reid, the farm-store held promise as a growth opportunity. After talking with a retail consultant, they learned they undercharged for their resale items (meat they purchased and sold from a local farmer, jams and jellies, and so on) and they could increase their prices by 20% for a standard and competitive mark-up. With minimal effort, this would increase profits by $6,000. They also noticed that over the past few years, revenue from the farmstand steadily increased – maybe there’s an opportunity to grow there.
The vegetables were most profitable, so it seemed that portion of their business was ripe for growth. Just this past year, they grew the egg operation sufficiently that that too was profitable.
Last year, they spent $14,000 on the pigs – from paying for the bedding, feed, processing and so on, and earned just less than that from the sale of the meat. While they saw an opportunity to increase their pork sales, they didn’t want to increase production unless they could figure out how to reduce the costs of raising and processing pigs
Expand into new enterprises
A new enterprise comes with more unknowns – you may have a sense of the potential revenue and expenses, but no historical financials to base the assumptions. Expanding into a new enterprise comes with more risk but also the potential for greater reward.
With the farmstand growing, Naomi and Reid considered creating value added products such as salsas, sauces and jams. With the farm-stand, they had a ready sales channel. And with the efficiencies in the vegetable production, they had plenty of fruits and vegetables.
Run the Numbers
With all the back-work, Naomi and Reid had a solid understanding of their historical numbers. They could begin plotting out what expanding their operations would mean to their cash flow and profitability. What investments would be made, what expenses would increase, and how much additional profit could they expect.
They calculated “back-of-the-envelope” numbers, and figured that if they could grow an additional $50,000 worth of produce annually, they could add $25,000 to their profits.
Step 3: Create a Plan
An increase of $50,000 in production doesn’t just magically happen. Seeds and supplies need to be ordered, staff needs to be scheduled, recipes need to be developed and product needs to be processed.
Naomi and Reid decided that in their first year, they would target an increase in production of $25,000, the second year $50,000 with the 5 year goal of increasing production by $250,000. With the stepped up production, they figured on stepped up costs, and planned out their purchasing, infrastructure and staffing needs to achieve their goals.
Just like production doesn’t magically increase, neither do sales. Naomi and Reid sketched out their plan to sell the products – in their farm store, at farmers markets and eventually wholesale.
With the plan laid out, Naomi and Reid realized that a loan would help them make the initial jump in growth: to purchase new equipment or prepay for supplies. Of course, to apply for a loan, they needed to create financial projections. This would demonstrate to the banks they had a plan for increasing sales, moderating expenses, and generating enough profit to pay back the loan and start saving.
Step 4: Track and Measure
A business plan is written with starry eyes and lofty goals. You may know for certain some details, but not all. It’s not until you’re in the thick of your growth plan that you really know how things will evolve. You may incur unexpected costs, or gain efficiencies faster than expected. You may realize that one sales channel is not available after all, but another is. Seasonal demands may shift.
With all the vagaries of the business plan, it’s important to look back to make sure you’re on track. You wrote the plan with end in mind, but if the path changes, then you need to adapt. By reviewing your plan often and comparing it to the actual business you can make adjustments to ensure you reach your goals.
The best way to track and measure your progress, is to have a good bookkeeping system in place. With solid records, you can review your progress – revenues and expenses – and compare them to the projections in the business plan. If you notice that sales are ramping up more slowly than expected then you review your marketing strategies to better sell, cut back on expenses to ensure that your cash flow doesn’t spiral out of control and review your product quality to ensure that your customers are buying the product you intend. With regular review of your progress, you can make micro-adjustments to ensure you stay on track.
Of course – if your actual profitability exceeds expectations…. Good for you! I send you my heartiest congratulations.
Need helping articulating your growth plan? Give us a call or check out The Farmer’s Office.
Whether you’ve been in business for 10 months or 10 years, you’ve probably turned over the calendar to 2017 with the goal of increasing profits. I know I have.
For me, I spent the last week of 2016 (when all my revenue had been accounted for, and the expenses entered), digging into my financials; looking at what went well, what didn’t, and how I want to increase profitability for the coming year. The past year was a time of transition and experimentation for me: I had two books published and I spent more time speaking at conferences and promoting the books. It was interesting to see how it all manifested itself in the numbers. The difference in the two books was stark – though I generated more revenue from the cookbook, the promotional costs for the cookbook, not surprisingly, were greater than the business book. While the time preparing for each event was more or less the same; for cookbook events, I also bought food and printed recipes. For The Farmer’s Office events, I just showed up. The measure for a successful event for each book is very different.
As I sifted through my QuickBooks data, I also realized I needed to make changes to how I tracked my financials. What worked before doesn’t make sense now that I have book sales and promotion. To get meaningful information, I reclassified many transactions.
For the New Year, I can make goals for how I want my business (and book sales) to grow, I have an improved system for tracking my progress, and I have a basis to measure my success.
If your goal is to increase the profitability of your business over the next year, then you need a plan to get there. And there’s a process to get there: To create that plan, you need a solid understanding of your business’s economics; and you may need to resolve to make some changes in your bookkeeping habits. (It always comes back to bookkeeping, doesn’t it?)
Here are 9 resolutions to help you tackle the financial management of your business and stay on track to improving your profitability.