Module Ten: Run the Business
Module Ten: Run the Business
Running the business is the “fun part”. This is where you take all of the tools acquired to prepare you for operating a successful business and put them into practice. Before you can sell the products/services your company offers, you must get out there and source the materials. Once you do and the cash starts coming in, responsible money management and budgeting will prove to be your company’s best friends.
If your business consists of selling products and even some services, you must source suppliers to provide the items to you and create a Master Agreement with them. Having a master agreement that clearly outlines the terms and prices will allow the transactions between you and the sellers to run more smoothly
How do you find suppliers?
There is no hard rule on how your company should locate suppliers, but here are some steps that can help along the way.
- Have all interested suppliers complete a questionnaire. Make sure the questionnaire is comprehensive, asking all of the questions necessary for you to select the right supplier for your company.
- From all interested applicants, select a small group of the most qualified candidates. Send a request for proposal (RFP) to these candidates. In the RFP, discuss the products and/or services you require as well as other pertinent details (e.g. timeline).
- Those who are still interested will submit a proposal to supply for your company.
- Select the supplier that best meets your needs.
Sell! Sell! Sell!
Most people think, “Selling a product (or service)…that’s easy!” While this may come naturally for some, effectively selling is not so easy for others. It is important to create a method for selling rather than haphazardly doing so. This is a business and one of your main goals is to make money. To make money consistently, carefully consider these steps:
- When you make initial contact with your prospective customer, greet him/her. You’d be amazed at how much this gets overlooked. Keep in mind, that a little acknowledgment goes a long way!
- Get to know what the prospective customer needs. How can you intelligently discuss the benefits of your products/services if you don’t know how they can meet the customer’s needs?
- Restate what the customer has shared as their needs. It is important to confirm you have properly understood what the customer wants. This will save a lot of time and headaches on the back end.
- Develop a plan of action to meet the customer’s desires.
- Simply ask for the sale.
- Close the deal.
- Follow-up with the customer. Selling is not just about the sale itself, it is also about relationship-building. A repeat customer is the best customer to have.
How to Manage Cash Flow
It is not necessary to be an accountant in order to manage your cash flow, but you must understand basic accounting principles. First of all, you need to know what cash flow is. Cash flow is the phrase used to describe the funds that come in and go out of a business. If you have positive cash flow, that means you have more money coming in than that going out. That means negative cash flow is…you guessed it…more money going out than that coming in. A company that has positive cash flow is not something that happens on its own; the business has to implement strategies that promote such.
What are some ways to improve cash flow?
- Increase your sales
- Don’t extend as much credit to customers
- Give your customers pricing discounts
Budgeting should be a major component of every business, whether large or small. It serves two purposes. 1. It allows the company to estimate what is spent on expenditures. 2. Companies can use the figures at the end of a specified period to determine if the company has stayed on budget and how this has affected its bottom line. Before you can create a budget, you must know what you are working with. First, determine what you want to measure. Do you want to keep track of what you spend on supplies, personnel, and marketing? Then you need to gather all of the receipts, documents, and other information that pertains to those items. You need an idea of the reasonable costs of those expenditures, as well as figure out ways to decrease the amount of money you have spent on them in the past. This will help you make better predictions of how to set your budget.
Deciding on the method of budgeting to use depends on your business needs as well as your personal preferences.
Some options are:
- Zero-Based Budgeting: This type of budgeting starts with a “zero baseline.” All expenses must be justified each period.
- Top-Down Budgeting: Cost projections start at the highest level of the company (i.e. executives), then come down.
- Bottom-Up Budgeting: Cost projections start at the departmental level with employees, then go up.
Lesson SummaryRunning a successful business requires careful management of finances and operations. Key activities include:
- Procuring materials to sell - Complete a questionnaire to select a small group of qualified candidates, then send an RFP and select a supplier that meets your needs.
- Effective Sales - Greet customers, get to know their needs, restate those needs to confirm them, develop a plan of action to meet the customer’s desires, and ask for the sale.
- Maintaining Positive Cash Flow - Increase sales, reduce customer credit, offer pricing discounts, and manage expenses.
- Budgeting - Determine what to measure, collect documents and information, use zero-based budgeting, top-down budgeting or bottom-up budgeting.