When asked to sketch out your business structure, do you go right to a flowchart? Org chart? Table of organization? Helpful, yes, but instead, consider your business as a funnel with a wide mouth.
A mental snapshot of your business structure is important! Once you picture the structure of your small business performance, it is easier to visualize your needs. The sketch provides a picture of your business performance, gives it shape and organization. The idea of business structure becomes concrete and useful.
Looking at your business funnel, you can see some important things:
- Taxes are pretty much beyond your control. There’s just so much you can do – other than to work with a tax professional to better your position going into the end of your tax year and re-focusing on your 2013 targets.
- Fixed Costs are, of their nature, “fixed.” They will change little – regardless of your performance. For example, your rent is a continuing cost throughout your lease, and utilities are something you can manage but not control.
- Costs of Production include materials and labor. Relatively stable, they are a function of outside market forces.
- Sales is the one number you can change if you want to improve your profit flow.
By this time, in 2012 Q3, you should know how your Fixed Costs will roll out. You can reconsider your lease and/or strategize your utility budget. If Costs of Production or of Doing Business are getting out of hand, re-position yourself with your vendors for better opportunities through 2013 Q4. And, meet soon with your Tax Consultant to look at 2013 impacts.
The small business innovator takes on the challenge of increasing profits by expanding sales. How will you meet the challenge?
By Steven Schlagel