Road to success: How a business owner can tell if a company is headed in the right direction
How to tell if your business is headed in the right direction
16 July 2012
Carolyn Portuondo doesn’t sleep well. Most nights she lies awake in bed as her mind wanders to her bakery, Caked Las Vegas. She wonders about the air conditioner going out, losing cash flow and customers. Most of all, she worries about her dream coming to an end.
“Even though today I am successful and making money, you are always wondering, ‘What if I don’t get these customers next month?’” Portuondo said.
Portuondo opened her bakery in 2010. Next to her cash register, she framed a dollar — the first one Caked Las Vegas ever earned. It came on opening day, Feb. 10, after she sold a red velvet cupcake to an Allstate Insurance employee next door.
Since then, Portuondo has been featured on TLC’s “Cake Boss” in back-to-back years, accumulated a clutter of plaques for “Best Wedding Cake” and baked a cake for the opening of McCarran International Airport’s Terminal 3.
Business has been good. In fact, Portuondo is preparing to move next month to a larger location.
“I’ll be honest, when I opened the doors to Caked, I knew it would only take time until we were the best in Las Vegas,” Portuondo said. “The main thing was, I was confident in my skills. I knew if I wanted something to happen, I wouldn’t let it fail — which is why I’m here 18 hours a day, and I haven’t had a day off in I don’t know.”
Still, despite her bakery’s success, Portuondo can’t help but wonder if and when it will end. It’s a question that plagues most small business owners: Is my company on the road to success or failure?
There’s often no way to tell. Market conditions change. Costs rise.
But there are markers along the way that businesses can look at to determine if they’re headed in the right direction.
It seems simple enough. Making money is good, losing money is bad. Most first-graders running a lemonade stand can understand that.
But cash flow is a bit more complex.
Raj Tumber, a small-business counselor at SCORE, said comparisons are a better measure of fiscal health. SCORE is a nationwide nonprofit group that helps entrepreneurs form and grow small businesses. In Las Vegas, more than 50 working and retired business owners and professionals donate their time as SCORE counselors.
Tumber recommended that established businesses compare their current month’s revenue to the previous month’s.
New businesses are almost destined to lose money in their first few months. So owners should compare their cash flow to projections from their business plan, Tumber said.
That’s why it is so important for new companies to have solid business plans in place.
“The guys that are succeeding, they’ve done the whole plan and got the whole financial (picture) down, and they’re saying, ‘Now we know what we really need (to make),’” Tumber said.
Portuondo has cash flow down to a science. Every day, she can mentally calculate whether her business earned or lost money based on the number of customers who walk in and the number of cakes they buy.
“At the end of each month, we see where we are,” Portuondo said. “Last month we did ‘X’ dollars on this day. If we haven’t reached that point, we know, ‘Oh cupcake sales are low,’ so we push cupcakes. We are always checking that.”
Bottom line: Tracking cash flow comparisons allows a business to determine whether it is reaching its target market, what changes need to be made and if the business is sustainable.
Referrals and repeat customers
Customers aren’t always logical when choosing with whom to do business. People often base their decisions on their feelings rather than their brains.
They also like to talk. A dissatisfied customer is likely to tell their friends and anyone who’ll listen to go elsewhere for a service. On the other hand, positive reviews can entice new customers to try a company and help a business grow.
“People need to recognize that marketing is extremely important and making those relationships is crucial,” said Rebecca Fay, director of the Henderson Business Resource Center. “People are going to do business with Bob the plumber because they like Bob the plumber. He may not be the cheapest, but they really enjoy working with him.”
Brian Rouff, who co-owns the marketing firm Imagine Communications, said his company is constantly working on improving its relationship with the public. Staff members blog, update social media websites and try to make people understand who they are and what services they offer.
Providing quality products is key, Rouff said.
“It sounds simple, but doing those things, word of mouth becomes organic,” he said.
Rouff said he knows whether his company is on the right track based on the number of referrals they receive. He always asks new customers how they heard about the business.
Portuondo, on the other hand, gauges her success on repeat customers. One of Portuondo’s customers, for example, used her for a wedding cake, two baby shower cakes and a baby’s first birthday cake. That’s that kind of loyalty she strives for in every transaction.
Bottom line: Positive word of mouth cultivates new customers. Good experiences attract repeat business. Both can keep a company afloat.
Fay likens owning a business to being married. It’s a 24-hour-a-day, seven-day-a-week endeavor.
When business is good, it’s exciting. But as time goes on and life becomes more routine, the passion can subside.
For a business to succeed, an owner’s spark can’t go out, Fay said.
“To be successful, you have to love what you’re doing,” she said. “I know a company that is struggling right now, and (the owner) finally identified that she hates what she’s doing.”
A business owner’s enthusiasm, or lack thereof, permeates a company’s day-to-day operations. Passion can create an atmosphere of excitement that is key to success, Fay said.
“If your energy is drained and low, what are the odds that you’re going to go out there and get other people excited and get customers to come to you?” Fay asked.
Bottom line: Passion for a project is contagious. If you put your all into a company, your employees will, too, and customers will notice.
Rouff knew Imagine Communications needed a change in 2009. The economy was entering the depths of the recession and businesses had begun to stop renewing their services.
It was then that Rouff realized his company blended in with other marketing firms. They didn’t stand out. They were in trouble.
Instead of plugging away, doing business as usual, the staff at Imagine tried something new. They started specializing in web-based solutions and social media management. They transitioned into consulting. They shifted their motto from “creative business thinkers” to “creative solutions in a new economy.”
The changes were key to the company’s ability to stay open while others closed down.
“The key to survival is to try and stay ahead of the market and predict what people are going to want and need,” Rouff said. “What’s the next big thing?”
Successful business owners can pinpoint what makes them unique.
“You have to be very, very clear,” Fay said. “If, for example, you’re doing pizza, there are a million pizza restaurants out there. What makes you different? Why should people come to you?”
Bottom line: Separate from the pack to make your business stand out.
Risk and opportunity
Every business needs to take risks to succeed, the experts say. Problems arise when those risks become gambles.
An education can help minimize potential problems.
Dr. Scott Lamprecht, for example, attributes the expansion of his medical consulting firm, Complete Medical Consultants, to the time he spent learning how to make business decisions.
Lamprecht started his company in 2003 as a part-time gig. He taught medical classes at area universities and hospitals while his wife Lynette handled paperwork.
In time, Lamprecht’s class load increased, and he found himself unable to handle his growing business. So the teacher became the student.
Lamprecht took classes at SCORE. They gave him the foundation that taught him how to make business decisions, he said. His company now offers more than 10 classes a month and recently moved into a new location.
“It always feels like a risk no matter what because it’s a step-out-on-a-leap-of-faith kind of deal, but we are more confident from it,” Lamprecht said. “We have a lot more of a business mindset.”
When risk is rooted in planning and knowledge, it can become an exploration of opportunity rather than a leap of faith, Tumber said. But if the risk feels like a gamble, it’s usually a bad sign.
Bottom line: Classes and training are worth the time and investment. They can help business owners minimize risk and maximize opportunity.
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