 The magazine of the Melbourne PC User Group The computer and small business Bob Mayston bobmay@melbpc.org.au |
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So you want to use your computer and set up a small business (SB). Perhaps like me you were involuntarily retired, or maybe you always wanted to do your own thing.
Fine, but before you rush out to hang up your shingle, it might be a good idea to ask yourself if you have enough of the right characteristics and abilities to be successful.
Although this article only presents a quick guide the information in it can help you answer that all important question.
Regarding the characteristics of successful SB operators, you should realise that your computer cannot help you with any of them.
Drive
- You need determination to get ahead, to live with and grow the enterprise. It's not a 9-5 job. Running a business takes energy. You must be willing to "carry the can", shoulder responsibility, make decisions and live with them.
- SB is no place for the shy; shrinking violets seldom succeed in business.
- You want to be captain of your own ship, be your own boss. You have the ability to see the whole project through.
- You must be able to organise your time and maybe direct others.
- You need customers. You must be able to get along with people. A pleasant outgoing personality attracts people and customers.
- You need some previous business experience, preferably in selling, buying or production.
- You will do best as an optimist, no-one likes a pessimist.
It's a big plus if you know the business of the business. Be wary of venturing into areas where you have no previous experience. Whether you can operate from a home office (and save some costs) or need a high visibility retail outlet, will of course depend on the type of business you operate. That said, if you use a home office, you need a dedicated area and a strong commitment to keep home and business activities separate.
Universal requirement
All businesses--large and small--need paying customers. Note the emphasis on paying. Don't let customers consume inordinate amounts of your time without paying for it. It's OK to be Mr Nice Guy, but only to a point. On the subject of finding customers, your former business connections are good prospects, and you may find the Yellow Pages and trade directories fertile hunting grounds. Most word processing programs have mail merge features which you can use to personalise direct mail material. Be aware though that the average response to mail-outs is less than 2%. So make sure you are spending your prospecting and or promotional budget effectively.
Find a need and fill it
Personal service is disappearing in big business today. If you don't believe that, try phoning any large corporation and locking horns with its automated phone answering system. This is where you, as an operator of a SB can excel, by providing personal, prompt, efficient and reliable service. You don't have to be the cheapest kid on the block if you excel in providing your customers with friendly, prompt attention to their needs.
Make sure clients and potential clients can contact you, by phone, fax and e-mail. Don't skimp and rely only on a fax-modem, which can tie you to having your computer on all the time.
Instead purchase a dedicated fax perhaps combined with an answering machine and--if you can afford it--at least one dedicated phone line for your business, better still, two lines, one for voice and one for fax.
Counting beans
Bookkeeping skills will serve you well in SB, unless you want and can afford to farm them out. As with mail merges for direct mail, bookkeeping is another area where your computer will come in handy. There are several good programs specifically for small businesses.
I am always amazed at small business operators who say they do not have time to learn some basic bookkeeping skills. Eventually they end up wondering why they went broke. You should also beware of programs that claim "no accounting skills required". When you are running a business, you must know what makes up the P&L statement and the Balance sheet. You need professional help with these fundamental reports, before you set up your bookkeeping/accounting system. Otherwise you will get your accounts in a mess.
Here's a tip, have your accountant set up the chart of accounts, which you can then translate to your preferred program. Consider too, that with GST in the air, you will want to make sure that any bookkeeping/accounting program can handle it.
I initially used Quicken but later changed to Quickbooks because I needed its additional features, such as job costing and ability to issue statements and its improved invoicing and stock control module.
One duty you should never neglect no matter how pressed you are for time, is a regular (at least monthly) bank reconciliation, and I mean reconciliation down to the last cent. Failure to do this can create a chain reaction of undetected errors in your books that can consume hours to resolve.
Be wary of over-computerising. There are many computer-based business organisers on the market, but many overkill with features that few use in full. By all means be organised but don't overlook the simple solution, such as a pencil and a small lined notebook. This solution can be instantly available and discreetly transported. You may impress or intimidate a potential client with your laptop computer, you never know. On the other hand taking a few pencilled notes is not obtrusive and later you can edit your notes and enter them on your computer.
Presentations, getting value for time spent
There are many programs you can use to make impressive presentations for your clients. Most require some time and effort to learn how to use them properly. Before investing in one of these programs, ask yourself, "What am I going to get from using the program...is it likely to lead to increased profits?"
Try to calculate how much time (money) you can afford to spend learning the program, preparing presentations, producing slides or overhead transparencies, and how much you will need to increase your income to pay for your effort. If making snazzy presentations is something you love, factor this intangible into your consideration. Also, if your spouse or partner is interested in the field, you may have a helper... remember though your success will depend on you keeping your eye on the prime objective...growing your business.
Planning
Of course you have a business plan which you created with realistically achievable goals. If you do not, there are several good programs available to help you do so. Avoid a common trap however, by keeping the following in mind at all times.
In the final analysis you will have to implement the plan and achieve the objectives. Your computer will not go out and do it for you, so don't spend all your time learning the ins and outs of the planning software or consider endless "what if" scenarios at the expense of working "on your business".
Invoicing
Modern programs such as Quickbooks do an excellent job of invoicing. You set up the customer and product lists correctly and then you are assured of consistent addressing and cost extensions together with accurate invoice totals. Say goodbye to handheld calculators and let the program do the work.
Don't pay fancy prices for printed invoices and letterheads. Make a sample and take it to one of the many quick printshops around for economical well-presented company stationery.
Tracking progress
When you are up and running use your financial program to keep you informed of progress. With programs such as Quicken and Quickbooks you can rearrange the items on the P&L statement to give a trading statement, which is a good guide to progress as it reports Gross Profit. If your SB has reasonably constant expenses, Gross Profit can be a good barometer of progress.
Getting paid
Invoices alone may not do the trick. Don't overlook statements, in fact, some customers pay those accounts which provide a statement along with an invoice first. Most programs such as Quickbooks and MYOB (Mind Your Own Business) easily print statements to accompany the invoice. (I print mine on the back of the invoice and so no extra paper is needed.)
Time management
Friday afternoon is not a popular time for seeing customers, so I find it best to devote it to office duties such as invoicing, bank reconciliation, checking stock, thinking and reviewing progress and all those other essential jobs.
Don't be carried away with all the fancy features of modern computer-based business programs. Your time is valuable so use the essential elements and forget the rest. For example graphs don't tell any more than plain figures, so why print them. Your aim must be to grow the business.
It is now 15 years since, at age 60, I started my own business and they have been the best years of my life. At first I hand-typed invoices, correspondence, etc, until good economical accounting programs came along like Quicken then Quickbooks, which has largely automated the tasks for me as I have grown up with each new version of the program. Such programs and my computer are now essential tools to run my business.
I present my accountant with the reconciled accounts and leave him the final task of checking and determining depreciation, filling in of the statutory forms and submission of accounts. It's horses for courses, I'm not in the accounting business and so the finer points are best done by a professional while I concentrate on looking after my business.
If you are contemplating setting up in business for yourself I hope these tips and personal experiences help you make up your mind.
Good Luck.
Reprinted from the February 1999 issue of PC Update, the magazine of Melbourne PC User Group, Australia
