Essential Business Skills – How To Run A Business Competently
Opening a business is not difficult – much harder to stay afloat in the early months, to achieve a return on investment and turn a profit.
How to manage everything
Very often entrepreneurs out of necessity take on too many roles, forcing them to make many important decisions for the fate of the company on their own.
As the company grows, there are more and more of these decisions. This leads to the fact that some issues that fall into the category of non-critical remain unresolved. Thus, the need to resolve them from time to time falls on the shoulders of the manager.
In order to change this dynamic and gain working time, the manager needs to think through and communicate to employees a new scheme of interaction, involving the division of responsibility for managerial decisions.
Here are some basic questions to consider when delegating authority to subordinates:
- Who among your subordinates can you trust to handle responsible issues?
- Is there a reason why you cannot entrust them with more authority?
- Your subordinates’ loyalty to the company is undeniable, but they lack the experience to make the right decisions. What and when can you do to give them that experience?
If you can’t find the answers to these questions, and overwork is on the rise, then you are the cause. Your people will go dormant until you give them authority and an awareness of the reality: It’s okay to make mistakes!
Why profit is the main indicator of business success
If profits are all right, then the business is really effective. The other indicators only create the illusion of success.
The effectiveness of a business should be measured by its profits. The other indicators are an intermediate step on the way to the key one.
In order to properly measure your performance, an entrepreneur needs a tool that links the intermediate indicators to profits: the financial model.
Articulate what makes your business better than other companies in a similar niche. Look at it through the buyer’s eyes. This will be your unique selling proposition. You must clearly articulate to yourself why the product or service should be bought from you, and believe it yourself.
Even if you sell the same thing as your competitors, you may have a better customer experience, better photos on Instagram, 24/7 support, and so on. Focus on the benefits of your business and determine which ones are most important to customers.
Your service should be unique and useful to the customer.
How to properly withdraw money from a business
Often owners count profits on the balance sheet at the end of the month. What’s lying around, that’s what you’ve earned, you can withdraw. In reality, profit is not the account balance at the end of the month.
Correct Profit Calculation
Profit should be counted by the obligations fulfilled. The prepayment from a client is not yet your money. But when you close the deal and sign the paperwork, the money is yours.
Count the revenue from the closed acts, subtract operating expenses, taxes, interest on loans, and depreciation – this is your net profit. It can no longer be taken out of the business.
Plan your cash flow
Profit is calculated. For example, with a clear mind, you took the money on April 1, and on the 10th you need to give out wages and pay the rent. You can also use W2’s handy receipt form. It’s pay stub templates that can be edited to distribute money spent on taxes, and you can set it up to see immediately the money that will go to payroll. No money is the money gap. To avoid getting into this situation, plan your cash flow a month in advance.
Use a payroll calendar to do this. Put all your planned expenses and receipts into your account on it. This way you can see when you’ll run out of money to meet your obligations. Leave enough money in your work wallet so that you don’t run into a cash gap.
Save for development
Profit is calculated, the movement of funds is planned. It would seem that you can take the free money. But it’s too early, there is one last step left. The business needs money for development. There are three scenarios in which to set aside:
- You take all the free money. The business gets no investment; it has no chance of turning into something bigger. But if there are no such plans, the strategy is acceptable. The company will standstill, and you will live on your own. However, there is a risk that competitors will overtake, and the business will make less profit or become unprofitable. Then it will have to close.
- Everything is in development. You don’t withdraw a penny from the business, you put everything into development and even add from your personal savings. So that investment you will return only over time, but you will become the owner of a large and profitable company.
- This strategy allows you to consider the interests of both the owner and the company. Entrepreneurs follow the golden mean rule: they spend 50% on development, and take the remaining 50% for themselves. But you can choose other proportions as well.
Before you take money out of the business, set yourself a salary for the market, calculate your profits, plan your money flow, and set aside money for development. You can take whatever you have leftover.
How to analyze a niche
If you don’t do niche research, you run the risk of engaging in a topic for which demand is dying or remains high for only a few months of the year. To do research, there are some factors to consider.
The current level of demand and growth in demand for courses on the chosen topic will show how promising the topic is now and how successful the project will be over the long haul. Steady growth in interest guarantees, to a certain extent, a return on investment and the opportunity to accumulate personal experience.
It is also important to assess overall business performance to determine seasonal interest in the topic – the best periods for launches. This data will help plan the necessary advertising budget.
To avoid wasting time and money, use the MVP approach. In this case, the niche is analyzed and evaluated, a hypothesis is formed, a CustDev is conducted, a program is put together, a landing page is assembled, a webinar is held – if there are sales, you can start assembling the first version of the course.
It is worth choosing not only direct competitors for analysis but also indirect competitors: for example, experts who advise on certain topics.
Write down the evaluation criteria that will be important when developing your own product. These could be the following parameters – price, market positioning, marketing strategy.
Where to find information about competitors – view reviews and ratings: the tops in your niche; analyze marketplaces and various aggregators; study thematic platforms (media, blogs, telegram channels, social networks, specialized conferences).
6 popular niches right now
The main trend for the next 5 years is increasing efficiency and productivity through digital tools. We recommend you pay attention and explore the following most popular niches:
- Mental Health
- Physical Health
- Meta-language development through projective information consumption
- Everything you need for the information technology marketplace
- Entrepreneurial Courses
How to manage a business effectively?
1. Effective Communication
Proper communication is necessary for the best results, so you should make sure that all employees in the company receive the same messages. Direct communication is the most effective way that not only makes the message clear, but also creates a sense of trust, responsibility, and ownership in the employee, which allows them to achieve better results.
Communication is a two-way process. When discussing a plan and delegating responsibilities, everyone must be on the same page, it is very important. Meaning everyone should have the same idea about the plan and its implementation.
2. Timely Brainstorming
Brainstorming is an activity that involves getting ideas from everyone in the company. In large companies with a hierarchical management system, this is done at different levels in the form of mini teams, and finally, the ideas are discussed with senior management. And in a small business, an entrepreneur can organize a meeting with all of his employees and get an idea of the specific situation.
The great thing about brainstorming is that people have the freedom to express their opinions without judgment, as long as there is the logic behind the idea expressed, of course. This results in all employees sharing innovative ideas, whether they are experienced employees or new talent, which gives everyone a sense of confidence and ownership and allows them to put their best efforts into achieving the best possible results for the company.
3. Dynamic Environment
Any business at rest in an ever-changing environment cannot expect to develop or maintain the same market position it had at the beginning, as adapting to the latest trends helps it move forward and cope with customer or end-user demands.
Therefore, a business needs to adapt to change, whether it be production technology, customer preferences, or anything that can affect the business itself.
It’s not just about demand or the needs of end consumers, but also about new technology that the business has to cope with. We live in a technological society, so you must always be aware of all technological innovations.
4. Power and Responsibility
Business can only be effective if there is an appropriate delegation of authority and responsibility. There must be a balance or equilibrium between “authority” and “responsibility” because they go hand in hand. If the empowered person does not delegate constructively, it can create a problem in the entire work system, because along with authority comes responsibility.
It is very important to delegate some authority to the person you delegate responsibility to because it gives them the ability to make the decisions they need to make, rather than running after their superiors to get permission. At the same time, it gives them the freedom and confidence to make decisions and therefore develops them as effective employees.
5. Effective Planning
An entrepreneur needs to have two or three good plans (A/B/C) so that if one plan does not meet expectations, there is always an alternative plan ready that gives the optimal maximum result.
The best way to effectively manage a business is to plan effectively. You can easily accomplish this by planning a specific strategy for your business. First, you need to choose an excellent strategy, which should address both the positive and negative outcomes of the potential business plan. It is best to prepare for failure rather than success, as most aspiring entrepreneurs have a limited chance of success.
Planning processes can lead to increased productivity, improving the quality and efficiency of important business tasks. The purpose of planning as a process is to improve and optimize the way a company does business, such as:
- Reducing costs by reducing the number of personnel needed to perform the same process;
- Increased efficiency by eliminating problematic steps Increased accuracy by implementing benchmarks and success indicators to ensure that each step of the production process is performed accurately;
- A better understanding by employees of their team’s goals and objectives and their contribution to success.
A team is a group of people with different experiences, skill levels, knowledge, and mental processes. The effectiveness of a business is determined by the performance of employees and managers. If they demonstrate effectiveness in their workplace, it will certainly help to achieve quality results. Customer satisfaction and a company’s reputation often depend on the effectiveness of the team, which includes how to promote the company’s services.
All team members work together to achieve one goal and demonstrate their best qualities. This is only possible with cooperation, absolute understanding, fruitful communication, and a positive team atmosphere. It is quite possible that different ideas may generate conflicts in the team, but the hallmark of a strong and productive team is working cohesively toward a common goal.
7. Resource Management.
There are three basic resources in business: people, materials, and money. These are the most important resources that any organization must not only have, but also use optimally.
- People include human resources both inside and outside the business, including employees, stakeholders, everyone involved directly or indirectly. It is very important to take into account and take care of the needs of every person who is part of the business.
- Materials include raw materials, work-in-progress and finished goods. Timely management of materials is critical because they are the inputs that will later determine what the final product will be that needs to be delivered to the end-users.
- Business begins with the proper use and distribution of finances and cost management. Thus, it is the most important resource to start and sustain any business. Therefore, a business must have a reliable source of finance and maintain a healthy relationship with all financial groups such as banks, financial institutions, stakeholders, etc. In this concept, money means not only the funds available but also the costs associated with them. This means that in order to effectively manage finances, it is also important for businesses to cut costs without compromising the quality of services provided to customers.
Time management is key to effective business management because it plays an important role in all business activities, from planning to the proper implementation of those plans, which then produces effective results:
- Preparing an optimal plan that produces optimal results with minimal use of resources;
- Organizing funds not only for the implementation of the plan and the daily operation of the business but also for any contingency;
- An effective marketing strategy that includes market research, advertising, promotion, sales, and after-sales services;
- Allocation of appropriate resources for various activities;
- Changing approaches in response to market trends and technology updates;
- Taking risks in new lines of business or investing in new strategies.
“Entrepreneurs are always short of 24 hours a day, so it is important to optimize their time as much as possible.”
Effectively managing a business, as a rule, is not a skill that a person acquires in a short period. Business management is a task that requires a person not only to have extensive knowledge in a particular industry but also to have management skills and understand business processes.
This is a learning process in which methods and approaches can change many times throughout a career. However, the basic principles of business management, which always remain unchanged, include the ability to successfully motivate and manage employees, work on business development, participate in its management and follow business laws.
Thus, time management and the above-mentioned points help a businessman to manage his business very efficiently and effectively, which leads to excellent results by increasing profits and increasing the customer base.