There are many ways for a small business to be successful, from financial return, to work-life balance, to making the world a better place. To run a successful small business, first develop a clear idea of what success looks like to you. As you work out the mechanics of running your company, keep this vision in mind and make choices that will advance you along this path.
Whether or not your primary objective in running a business is to earn a lot of money, you must must make enough to keep your company afloat. To be financially sustainable, a small business must take in more revenue than expenditures on basic operating expenses. Even if you’re not practiced and comfortable with business bookkeeping, you can develop basic skills to help you understand what is going on with your business financials.
Learn to read a profit-and-loss statement, which will show you whether or not your business makes ends meet at the end of the day.
Learn to understand a balance sheet, which breaks down your assets and liabilities, comparing what you own with what you owe.
Familiarize yourself with pro-forma cash-flow projections, which break down anticipated earnings and expenses and help you plan for expansion and shortfalls.
Financing Your Small Business
Unless you’re running a solo business from a home computer you already own, it’s likely that you’ll need some financing to start your business as well as periodic infusions during slow periods or when your company is growing.
Cultivate sources of capital, such as friends and relatives, and develop relationships with banks. Assess your own capacity for financial risk. There aren’t any right or wrong answers as to the right amount of capital to put up, but you’ll be well-positioned if you have a clear sense of how much you’re willing to invest, and of how you’ll regroup financially if things don’t go as planned.
Develop a plan for paying back what you borrow. Lay out a schedule, and understand how much your business must earn to succeed at this plan.
Keeping It Legal
Do your homework so that you know how to start and operate your business legally. Initially, this process will take some extra time, but in the long run, it’s likely that it will save you time.
Get all the licenses needed to run a business in your city and state, as well as any permits you may need for your specific industry.
Choose a business structure that makes sense for your ownership arrangement, such as a partnership, if you’re starting your business with one friend. Consult a lawyer about the best structure for your particular circumstances.
Follow the rules and regulations for operating your business, and pay your taxes on time.
Quality of Life
There are laws against exploiting employees, but no laws against exploiting yourself. Many small-business owners work grueling schedules, and struggle to find a work-life balance.
Know your limits. Understand how much you’re willing to work to keep your company successful and where you’ll likely draw the line. Your willingness and capacity may change over time, such as if you’re emotionally prepared to work every waking hour for the first year you’re in business, but that you expect to take regular vacations once your company is established.
Communicate clearly with your loved ones about how your business will affect your home life. Understand their level of tolerance and understanding, and enlist extra help, if necessary, such as child care for your family, or additional employees for your business.