business

4 Ways to Grow Your Business from Small to Prime

by
Grow Your Business with Portal CFO

Many established businesses don’t become corporate overnight. It takes time and loads of resources to grow your business from small to prime.  It also takes capital, skill, and the ability to weather the storms of hard economic times that might threaten to set you back.  The magic wand for success is in figuring out how to bring in the profits and ensure the capacity needed to sustain that growth into the future.

What are the steps a small or mid-sized business owner should take to set their business on a consistent upward trajectory? Below are areas you might want to look at to grow your business from small to prime.

Accounting and financial reporting overhaul

Accounting is in simple terms a summary of your income and expenditure. If the items in your records are too generalized, it might be difficult to pinpoint conclusions from your financial transactions. The reason that it is important is so  you are able to tell which areas of your bookkeeping may need adjustments.  With improved accounting, you will be able to keep accurate and precise track of purchasing costs, wages for staff, taxes, owner draws, and other vital accounting and financial information.

Leverage on partnerships

Another great way to grow your business is to establish a connection with your suppliers and the competition.  Not only will you enhance your access to helpful industry information, stats and trends, but you will get to learn the areas where your competition is doing a great job.  Perhaps you will find out things that you could replicate in your business.

Get the bank loan

Your business might be doing so well in terms of improved profit margins, that all you might need to do is find ways to increase your sales and expand on your way to becoming a prime brand. Consider seeking the services of an expert to help you draft a compelling pitch to your preferred lender. They will give you valuable insights on how to fine-tune business components like the business plan, cash flow analysis, budget, financial projections, and any other aspect of your business the lender may ask about.

Perform an evaluation

If you truly want to come out of flat growth revenues, unchanging reported profits, and increasing costs, then reviewing your management team is not a bad idea. It may be time to consider a change in personnel with fresh ideas and energy for emerging challenges. Based on the size of your business, a restructuring initiative may be something you should consider in your growth and sustainability plans.

Remember, running a business successfully does not need to be complicated.  Keep it simple!

For more interesting topics to help you successfully manage the challenges of growing your business profitably, please search our blog at our website www.portalcfo.com.

Useful Advice for Starting A Business

by
Portal CFO Starting Your Own Business Photo

A lot goes into establishing a business and building it to the point of realizing profitability, and for that reason, the decisions you make at the initial stages are critical. You also need to give room for mistakes as a budding entrepreneur because they allow you to learn through experience! In this post, we have summarized three main pillars of getting a new business off the ground. Read on to learn some useful advice for starting a new business.

Start Today

Time waits for no one, which means that the perfect time to start a business will never come. The opportunity you are seeking to implement the business ideas you have on paper is here; it is today. Many startup ideas do not kick off for various reasons, which means that they will only remain a dream if you do not act. For instance, if funding is a challenge, you cannot wait to save enough as an aspiring entrepreneur. You only need to start with what you have right now, and soon your enterprise will be up and running.

Pursue Your Passion

If you are considering becoming independent and you do not have an idea of what kind of business you should begin, focusing on your passion can be a starting point. Venturing into any field in the marketplace is not advisable as well because it is one of the reasons why most startups fail. Pursuing what you genuinely love as you get into the business arena brings a sense of fulfillment in life, and over time you will join the league of those who own large enterprises.

Embrace Progressive Growth

As you start your business do not bite more than you can handle. Trying to work your enterprise into a multinational as soon as you begin is not a wise idea either. Instead, set realistic goals that will help you build your firm over time. Small incremental goals encourage continuous business growth and adopting the latter strategy gives you a better sense of how to maneuver challenges and seize opportunities.

Remember, running a business does not need to be complicated.  Keep it simple!

For more ideas on how to keep your business healthy and thriving, check out our website at www.portalcfo.com.

Identifying Business Processes: How to Keep Aware of Key Business Activities

by
business process

Identifying business processes is one of the many skills that you need to possess as a business owner. You’re probably wondering how you should approach the practice of identifying those processes and, perhaps more importantly, why you should do it.

We’ll go over the process and importance of knowing just what your business processes are, so that you can drive your company towards the kind of prominence that you envision for it.

Read more

Business Reorganization Consulting

by
business reorganization consulting

Going through the process of restructuring your business can be difficult enough that you should consider business reorganization consulting in order to make sure the process goes smoothly for everyone involved.  With the economy being the way it is right now, many businesses of all sizes and industries are changing the way that they operate. Some are scaling back on operations by reducing staff or changing locations to cut costs. Others are repurposing their staff and consolidating roles.

During economic times like this, it isn’t uncommon to see mergers and acquisitions occur so that a company on the brink of failure can keep its doors open. Nor is it uncommon to see a company completely rebrand itself and radically change its offerings in order to weather an economic downturn.

Regardless of the reason why your company is changing the way it does things, having business reorganization consulting can make sure that you’re able to turn your company around and get through the restructuring process without missing a step that could come back to haunt you later.

So what are some of the areas that you need to cover when you’re restructuring? Let’s take a look.

Key Areas and Characteristics

No one walks away unaffected when it comes to reorganizing a company. From the executives at the very top to the newest entry-level hires, everyone is going to feel the impact of this major event one way or another.

As a result, this fact extends to all areas of your company as well. Departments and practices like management, marketing, and accounting are all going to change in some way. Beyond those, you need to consider areas like:

  • Your Assets – How will these be affected when you reorganize?

Depending on the nature of the restructuring, some might remain intact, but others might have to be sold in order to generate revenue during the restructuring process. If some of your assets are underutilized, it might be in your best interest to dump them and keep them from becoming liabilities.

  • Basic Operations – Restructuring means taking a look at every part of your business, including the everyday practices that turn the wheels of the company.

In some instances, you’ll have to ask yourself if certain aspects of your operation can be outsourced for more efficient, more cost-effective output than what your company currently produces.

  • Your Reputation – Business reorganization consulting would, in part, advise you on how to maintain your relationship with your customers through effective public relations that assures them your restructuring will do nothing but benefit them.

As you know, customers vote with their dollars, so you want to do everything that you can to make sure that you don’t lose your base as your company changes its operations.

  • Your Plan – Without a strong business plan, you’re not going to get anywhere. That’s why it’s important to know exactly where you’re going as you work through your restructuring. You can use it to assess the current state of your business and establish goals that you want to reach, as well as a timeline for when you want to reach them.
  • Your Debt – Business reorganization consulting will help you make sense of your debt and how it relates to your plans to restructure.

It’s important that you have a strong understanding of your debt obligations at all times, and that means, among other things, carefully monitoring payments that you make on it.  It’s possible that, in analyzing this part of your business, you will have to rely on some negotiations with your creditors. It’s important to make sure that all of your affairs are in order when you’re reorganizing your company’s operations and the areas discussed on this page are just a few that you’ll need to be familiar with during the process.

With business reorganization consulting, you can make sure that each area of your business gets the attention it needs during restructuring, so that you’ll be able to adopt new business practices without any trouble.

Remember, running a business successfully does not need to be complicated.  Keep it simple!

For more interesting topics to help you successfully manage the challenges of growing your business profitably, please search our blog at our website www.portalcfo.com.

Why Hire a Business Coach?

by
why hire a business coach for your business

As someone who runs their own business, you may ask yourself “Why hire a business coach?”

While you may have a good grasp on running your company, you should know that you still have a lot to learn.

It could be argued that this is true for a business owner no matter what stage of development the company is in.

While someone who has never run a company before certainly has a lot of growing to do, you may not realize that someone who has been an entrepreneur for a while could also stand to consult an expert on certain matters related to the business.

It’s a common misconception that only the inexperienced could benefit from the insight that an outsider can bring to the table, but this blog post will illustrate just why that’s a misconception.

So, why hire a business coach?

Well, let’s take a look at several scenarios where such expertise could come in handy, and you’ll quickly see why working with someone from the outside could be to your advantage.

You’re New to Running Your Own Business

This is the most obvious scenario in which you might benefit from some coaching.

When starting out, it’s all too likely that you’ll have countless questions about how things should go. It’s no secret that getting a company off the ground, never mind making it a success, requires a lot of different things to happen.

Besides having a strong business plan that helps you define the path that you’re going to follow, you also need to be sure that everything you’re doing is in compliance with both local and federal laws. From making sure you have the right licenses, to being certain that you have the right marketing practices in place in order to get as much exposure as possible, there are a lot of gaps to fill in between coming up with your idea and getting customers to hand you their hard earned money.

If you’re new to running a company and you’re wondering “why hire a business coach“, then you should be thinking about roadblocks that you could potentially come across and how you’ll deal with them.

You could certainly find a way to remedy these issues yourself but, without experience, how long will it take you? During a company’s early days, resources are especially scarce and you can’t afford to let anything go to waste.

So why spend more time dealing with a problem than you would need to? In all likelihood, a good business coach has the experience necessary to foresee potential issues and help you deal with them as quickly and efficiently as possible.

Your Company Is Running and Bringing in Steady Revenue

If your company has been in business for a few years and you’ve been able to get a handle on how operations should run, it somewhat makes sense to ask “Why hire a business coach?” It makes sense, but that doesn’t mean you shouldn’t consider hiring one.

Business owners whose firms are beyond the startup stage, but ask “why hire a business coach”, may not have much to learn about what goes into getting the company on its feet, but they have much to learn about growth, development, and expansion.

With everything that it took to reach this stage, the last thing you want to do is get comfortable to the point where the business plateaus and growth stagnates as a result. As your company establishes lasting relationships with customers and adds to its staff, there will be greater demands on your time and money.

A good business coach can help you effectively manage your revenue to make sure that it goes to the appropriate places all in the name of continued growth. It’s also important to maintain strong ties with banks and other lenders, in case you need access to additional capital for a project that would be beneficial to your company.

This may also be the stage where you evaluate the feasibility of moving into new markets. If that’s the case, then the answer to the question of why hire a business coach is obvious.

Moving into a new market can be an alien prospect for you as an entrepreneur, and good executive coaching will help you determine what you can expect to see as you move forward. You will have to conduct thorough research and planning when expanding your business.

Having a good coach at your side during this stage can go a long way toward making sure that the process goes smoothly.

Your Company Has Been Around For a While

A business owner whose company is in a mature state may ask “why hire a business coach”, but they need to be aware of the fact that companies in the same sector may be looking for their own market share, and will be aiming for the established companies as a result.

During this time, companies can benefit from the services of a business coach in order to examine the feasibility of going back to exploring new markets and creating ways to retain customers and keep revenue up in the face of increased competition.

If increased competition affects business, good executive coaching can help with a turnaround in order to successfully restructure the company and become viable again. It’s important to remember that, as your business grows over the years, you have to do everything necessary to keep the doors open and revenue coming in.

With all of the uncertainty that is a part of entrepreneurship, you want to take every advantage that comes your way and use it to make your company a success.

The question shouldn’t be “Why hire a business coach?”

Instead, it should be “Why NOT hire a business coach?”

From helping a startup establish itself, to helping a distressed company reinvent itself in order to keep the doors open, a good business coach can do a number of things from an objective point of view that just about any business could benefit from in the long run.

Remember, running a business successfully does not need to be complicated.  Keep it simple!

For more solutions on successfully managing the challenges of growing your business profitably, please check out our website www.portalcfo.com.

What Is Purchase Order Financing?

by
what is purchase order financing

It isn’t uncommon for owners of small companies to ask What is purchase order financing? when looking for ways to gain some quick capital for mission critical operations. The thing is, however, that purchase order (PO) financing is something that might be ideal for a certain type of business in a certain type of situation, but it may not be something that works out in other scenarios.

In this post, we’ll explore PO financing and see just what you can use it for. Afterwards, you’ll have another bit of financial knowledge that will benefit you as an up-and-coming entrepreneur and will be that much closer to running your business with the best of them.

So, what is purchase order financing?

It’s a Way to Make Purchases Without Depleting Cash Reserves

As a small or medium sized business, you have to make sure that every dollar is spent wisely, right? That means that you need to be absolutely sure that you’re getting the best possible deal on supplies, equipment, and services that you need to run your business.

During the early years of a business, margins can be thin, so you can’t afford to let any of your resources go to waste. Still, cutting back isn’t an option. If you scale back on what you need to serve your customers, your reputation could suffer, people might turn to competitors, and you could lose market share quickly. That’s where PO financing comes in.

Whether your situation has your company seeing a lack of revenue as you attempt to turn your company around, or you’re saving your reserves for potential growth and expansion, you can use PO financing in order to continue operations.

When asking the question of “what is purchase order financing”, it’s important to think about how such a tool works as well.

In many ways, it acts as a form of cash. You can use a purchase order to pay creditors tomorrow for something that you’ll receive today, so to speak.

What happens is that you go through a PO financing company. That company then buys from your suppliers on your behalf.

The suppliers then fulfill their end of the agreement that your business has with them and the end product is delivered to your clients.

After the transaction is complete, the money from the letter of credit that the PO financing company drafted is released to the supplier and you typically have 30 to 60 days to pay an invoice to the PO financing company.

When to Use PO Financing

The question of “What is purchase order financing” goes hand-in-hand with when it should be used.

One such ideal situation for using this financial tool to further your business would be if one of your customers came to you with a large order that could potentially mean big things for your company.

While this is the break that you have been waiting for, the reality of the situation may be that you don’t have the capital or resources on hand that you need to make the order happen.

Bank loans may be out of the question as well, even if you have strong relations with your lenders.

When that happens, PO financing is your best bet for making that large order a reality so that you can deliver your product to your customers and grow as a company.

More About PO Financing: Who Uses Them

While many entrepreneurs may ask “what is purchase order financing”, they may fail to realize that the nature of this type of financial agreement limits exactly what kind of entrepreneur can use it.

These are the types of businesses that should typically be asking “What is purchase order financing?”

  • Producers – If you make a product, then PO financing could be an easy way for you to secure a large amount of raw materials that you use as ingredients. 
  • Distributors – You may find yourself having to send out a larger volume of a product than you usually would. In that case, PO financing can help you reach that goal.
  • Wholesalers – If you need to fill a larger than usual order with an existing customer, or are expanding to clients who purchase more than you normally supply, a PO financing may help cover the difference here. 
  • Resellers – Business owners in this industry who ask themselves “what is purchase order financing” can benefit from having more of a product to sell to customers by using PO financing.  

If you’re a business owner who wants to fulfill larger obligations to clients, but you aren’t asking yourself “what is purchase order financing”, then you should be.

Remember, running a business successfully does not need to be complicated.  Keep it simple!

For more information on business analysis, business planning, and ways to grow your small business profitably, please check out our website www.portalcfo.com.  Follow us on Twitter @portalcfo

How to Reduce Operating Expenses in Business

by
Cut costs

You can never have low enough overhead. Many entrepreneurs are always trying to figure out how to reduce operating expenses in business.

Let’s take a look at why you should reduce operating expenses in your business and what doing so can ultimately mean for a business owner like you.

1. Why Do You Want to Reduce Overhead?

With economic times being as unpredictable as they are, there are a number of reasons why you might want to keep your overhead as low as you possibly can.

Do any of these scenarios sound familiar?

  • Customer demand for your goods or services isn’t what it used to be – It could be that what you provide is seen as something of a luxury that people feel as though they can’t afford to use at the moment. Or perhaps there has been a perceived decline in your product’s quality.

Regardless of the reason, people aren’t buying in the amounts that they once did. This could lead you to trying to figure out how to reduce operating expenses in business, among other things.

  • Revenue is down across the board – This could be tied to the decreased demand or could be influenced by other factors like you being unfamiliar with what your competitors are doing.

Either way, decreased revenue could have you scrambling to figure out how to keep your head above water long enough to work out a way to get a strong cash flow going again.

  • Revenue isn’t being used efficiently – Do you often find your business is spending money in areas where it doesn’t need to be?

Wasteful spending is every bit as much a hindrance to growth in business finance as it is in personal finance, so it makes sense that you want to look at ways to keep that sort of a spending to an absolute minimum or simply eliminate it outright.

2. What You Need to Know Beforehand

What many business owners don’t realize in figuring out how to reduce operating expenses in business is that doing so can often carries risks. This makes the process of lowering your overhead more trouble than it’s worth and could potentially leave you worse off in the long run than you were when you first started.

Before you think about ways to reduce your company’s operating expenses, there are several worthwhile questions that you have to ask yourself.

Namely:

  • How will my customers be affected? – Everything that you do should ultimately benefit your customers in some way.  If the actions that you take in reducing your company’s operating costs could conceivably alienate the people to whom you provide your services, then your plans will definitely need to be reevaluated.
  • Will the quality of my products suffer? – Offering product that is inferior to what you used to provide cancels out anything that you achieved through reducing your overhead. If they don’t notice right away, your customers will notice the decline in time and take their business elsewhere.

You want to make sure that your offerings remain the same so that you can keep your customers happy.

  • Will it put me at a disadvantage? – You always want to be able to keep up with your competitors, so your strategy on how to reduce operating expenses in business should never undermine your competitive edge.

If lower overhead means fewer offerings, a reduced service area, fewer business hours or anything else that competitors could take advantage of, then you need to rework your business plan to lower your expenses without having to resort to any of those potentially harmful measures.

3. What You Can Do

Knowing what you do about how your business can be negatively affected by lowering your overhead, keep in mind that there are still several ways to go about continuing your business while remaining profitable.

The question of how to reduce operating expenses in business without being detrimental can be answered in some of the following ways:

  • Look at your employees – It makes sense that most consumers hold good customer service above anything else when considering where they will spend their money. That’s why you want to look at your employees as a way of reducing business costs.

How is that done, exactly?

Train your employees and keep them happy!

By providing a high level of training, your employees will know how to deal with certain situations and will be able to meet the needs of your customers.

Show your employees how important they are to the company’s mission and you’ll keep turnover, which can lead to high costs for your business, low.

  • Consider outsourcing some business functions – Every business relies on important services like information technology (IT) for communication purposes, and accounting for bookkeeping purposes.

In figuring out how to reduce operating expenses in business, one thing you could look at is outsourcing these important functions to professionals who specialize in these areas.

With respect to IT, outsourcing can save you money be lifting the burden of having to maintain, install, and update equipment and software, as well as having to devote time and resources to dealing with troubleshooting.

With respect to accounting, having a consultant carry out your company’s financial oversight will allow you to take advantage of expert bookkeeping that will be able to oversee financial record keeping much more efficiently than you might be able to were you to take care of it yourself.

Outsourcing both IT and accounting are textbook examples of how to reduce operating expenses in business because they allow you to get business critical services while avoiding payroll expenses and other taxes you would incur if you had these professionals as part of your regular staff.

  • Look at your production costs – How much is it costing you to provide your services to your customers?

You want to look at the materials that go into what you provide, as well as your relationship with the suppliers who provide you with those raw materials.

Are there alternatives that you can use in your production without affecting the quality? Do you have a strong enough relationship with your suppliers that you would be able to renegotiate the terms of your contract?

Many times, figuring out how to reduce operating expenses in business can be as simple as forming and maintaining strong business to business relationships with other companies.

Other times, it’s a matter of finding alternative ways to do something that you’re already doing.

  • Conserve energy – This may seem like a very basic premise, but take a look at how much good reducing your energy bill can do and you’ll see why it’s such a good idea.

By taking small steps like turning off devices when they aren’t in use, using lower wattage light bulbs, and generally conserving whenever the opportunity presents itself, you can see a dramatic reduction in one of your recurring bills.

These are just a few of the measures that you can take to keeping your company’s operating costs low. You just have to remember that when it comes to figuring out how to reduce operating expenses in business, you want to look for examples that might be unique to your industry on top of the examples illustrated here.

Keeping your overhead low without sacrificing quality of service or withdrawing the affections of long time customers will go a long way towards helping your bottom line.

Remember, running a business successfully does not need to be complicated.  Keep it simple!

Check out our website at www.portalcfo.com for more tips on how to grow your business profitably.

You may also be interested in Learning How to Reduce Operational Risk.

How to Reduce Business Debt

by
how to reduce business debt for service business owners

Once you’ve got your business up and running profitably, you probably want to know all about how to reduce business debt, right?

Depending on the kind of debt that it is, it could be eating into your cash flow and keeping you from expanding the way that you want to. It makes perfect sense that you want to get rid of any business debt you accumulate as quickly as possible.  Keep in mind that in some cases, there is debt that is “good” for your business.  We will discuss “good” business debt in a future post.

In many cases debt is inevitable, especially during the earliest phases of a company’s development.

Fortunately, that debt doesn’t have be something that constantly hangs over your head and keeps your enterprise from being the best that it can be.

Let’s take a look at some of the different strategies that you can employ to reduce your company’s debt.  You’ll see how you can gain peace of mind through business debt reduction.

  • Work with your suppliers – In figuring out how to reduce business debt, one of the first places that you should look should be the suppliers from whom you buy raw materials

If you happen to be behind on supplier payments, you want to work out a payment plan with your suppliers that will help you to get current with them.

Your company most likely depends on what your suppliers sell you, so you want to settle any outstanding debts with them first and foremost.

Doing so will make sure that your relationship stays strong and that you continue receiving the items you need to provide your own goods and services.

  • Sell, sell, sell – In order to reduce debt, you need to increase revenue. That much is obvious. There are several ways to go about doing that; the most straightforward of which is to increase your sales volume and move more product and services than you have in the past.

Offer incentives to your customers to get them to buy more, as long as its viable for you to do so. As you manage to sell more products, you can use the additional revenue to reduce your company’s debt.

  • Restructure – When many business owners try to figure out how to reduce business debt, one thing they often fail to consider is how much restructuring might help them reduce debt.

From selling surplus inventory and unused equipment, to cutting back on excess around the business, there are a several small, but significant things that you can do to get closer to your goal of eliminating your company’s debt.

  • Reduce Your Operating Expenses – This could fall in line with restructuring, or be its own strategy entirely.

Think about the things that always cost your money around your business.

You have your utilities like electricity and water, as well as services like your internet connection. Furthermore, you have the office itself, which you most likely pay to rent.

While it’s true that these things are the cost of business, it doesn’t mean that there aren’t ways to reduce them.

If it’s realistic for you to do so, consider moving to a smaller office or switching service providers for more cost-effective solutions. The money that you save could be reallocated to tackling your debt.

Likewise, you could consider alternative scheduling for your employees. If you encourage them to spend time working from home on their own schedules for part of the time, you can ease a transition to a different office.  Likewise, you may not need to purchase, power, support, and maintain as much equipment around your office.

  • Look over your taxes – Speak with your accountant, CFO, or any other financial expert that you employ and they can help you figure out how to reduce business debt.

One way that they might do this is by going over what you pay in taxes and making sure that you are counting all of your eligible deductions throughout the year.

It pays to do this often because tax laws are always changing and new ways for businesses to take advantage of tax breaks are always popping up.

You want to make sure that your annual tax bill is always at its lowest possible number, so that any money left over after you pay the IRS can go towards reducing your company’s business debt.

Keeping your debt under control is one of the most important things that you can do as a business owner, so you want to make sure that you’re taking every step that you can to pay back creditors and keep outstanding balances from impacting your company’s bottom line.

Remember, running a business successfully does not need to be complicated.  Keep it simple!

For more interesting topics on successfully managing the challenges of growing your business profitably, please search our blog at our website www.portalcfo.com.

How to Reduce Operational Risk

by
how to reduce operational risk in your business

The question of how to reduce operational risk is one that should be on the mind of every last business owner. It doesn’t matter if you run a hot dog cart or a multinational conglomerate. It doesn’t matter if you’re the only employee or you employ a workforce that could populate a small city.

Whoever you are, whatever you do, you need to know about the many different ways your company is constantly exposed to operational risk. You also need to know what you can do to reduce risks so that they aren’t as much of a hazard to your company’s success.

Doing so is necessary to maintaining a competitive advantage. It also ensures that your company is able to keep a strong presence in its sector. Because no businesses are alike, the risks that they face will differ, so this post will take a broad look at how to reduce operational risk. By the end, you’ll be able to take the principles of what’s discussed here and apply them to your own business practices. This should allow you to reduce the impact of the losses that your business could incur as a direct result of risk.

4 Steps – How To Reduce Operational Risk:

Step 1:  Managing Equipment Failures

For all of the good that technology has done for the world of business, the equipment that you use to conduct your operations can still break down. Depending on the severity of the failure, you could face crippling losses in revenue.

It’s because of the fact that technology has become so intertwined with businesses that extra steps have to be taken to:

  • safeguard information
  • make sure all equipment works properly
  • ensure alternate plans are in place in the event of a failure

If your company relies heavily on information technology (IT) infrastructure like a computer network, then make sure that programs and hardware are up to date and protected by the best security that you can afford.

If you operate in manufacturing, transportation, or any other industry that relies heavily on machines with a lot of moving parts, then the question of how to reduce operational risk can be answered by adhering to regular maintenance and making sure that small issues are addressed quickly enough that they don’t become large issues.

Step 2:  Keep Strong Business to Business Relationships

Your business wouldn’t be able to survive without the work of other businesses. Whether you rely on another company for supplies, shipping, or anything else that you need to count on in order to run your own enterprise, it pays to keep strong relationships with other companies.

In thinking of how to reduce operational risk in this respect, you have to look at common risks like miscommunications, accounting errors, delivery failures, incomplete or missing legal documents and vendor disputes as ways that business to business relationships can expose your company to risk.

With this type of operational risk, you want to make sure that you and your vendors and suppliers are always on the same page when it comes to your transactions. It never hurts to double check figures and make sure that invoices, quantities, and other aspects of the business to business supply chain are correct.

Doing these things can keep your relationships strong and reduce the likelihood that errors common in these sorts of interactions will have negative effects on either side of the transaction.

Step 3:  Having Adequate Insurance

You want to make sure that, in the event that something does happen, your business has the proper insurance it needs to cover the event.

It could be anything from property damage to a personal injury, but having an insurance policy that covers something that could negatively impact your business could mean the difference between a minor and major disruption in your business operations.

When thinking about how to reduce operational risk as far as your insurance coverage is concerned, go over your existing insurance policies and make sure that all possibilities are covered. It pays to consult with a representative of your company’s insurance broker to guarantee that you have all of the coverage you need.

From property insurance to liability, there are a number of different types of insurance that you can get to cover your business. Make sure you have them all and risk won’t catch you off guard.

Step 4: Know the Regulations

If you stay up to date on state and federal regulations as they relate to your business, then you take a huge step towards knowing how to reduce operational risk.

Whatever it is that you do, you want to make sure that all of your business practices are well within the confines of the law of the land in which you operate.

Things like health and safety standards, employee wages, licensing and certification, taxes, and permits all have an influence on how you’ll run your business. Don’t let ignorance of the law lead to trouble later down the road.

Remember, running a business successfully does not need to be complicated.  Keep it simple!

For more interesting topics on successfully managing the challenges of growing your business profitably, please search our blog at our website www.portalcfo.com.

How to Perform a Break-Even Analysis: Step-by-Step Guide Provided By PORTAL CFO

by
break-even analysis

As a business owner, it goes without saying that your ultimate goal is to make a profit but, before you do that, you have to reach a break-even point (BEP). This is the point at which revenue earned will match your expenses.

If you can figure out how to perform a break-even analysis, you can determine whether or not your company has reached its BEP. Even if you haven’t reached that point yet, performing a break-even analysis can help you determine when you will reach that point so that you have something tangible to work toward.

Let’s take a look at the various methods that many companies have used to see how close they were to their own BEPs and you will see for yourself how to perform a break-even analysis.

Your Company’s Costs

When it comes to trying to determine what your company’s BEP will be, there are several factors that you need to consider. Among them are:

  • Your Fixed Costs – These are the costs associated with your company that stay the same every month. Things like the rent on your office space, your insurance, utilities and the like.
  • Your Variable Costs – These are expenses that can change from month to month. Things like shipping payments can be considered variable costs that your company has to undertake. If you perform a service, the quantity of how many items you need to buy in order to perform that service can also change from month to month.
  • Your Prices – How much are you going to charge a single customer for a unit of what your provide? Having a concrete answer for this is essential to determining your company’s BEP.
  • Your Revenue After Each Sale – After performing the service, you have to look at how much money is left (from the customer’s payment) once you’ve recovered the costs directly related to performing the service. This amount is your average gross profit.

Each of these costs goes in to figuring out how to perform a break-even analysis. Once you have these costs sorted out, you’ll know exactly how much you need to sell in order to cover all of the costs associated with your business.

In order to figure out exactly what your BEP is, you need to divide your company’s fixed costs by the contribution margin of your of your product.

The contribution margin is what you get when you subtract the variable costs related to a unit of whatever you sell from the sale price of that unit.

Say you run a pizza shop and you want to figure out the margin on a large cheese pizza. Let:

Margin (M) = ?

Price (P) =  $12

Ingredients (I) = $3

Wage (W) for the employee who makes the pizza = $7

The formula for the contribution margin would be P – (I + W) = M or 12 – (3 + 7) = 2

This means that you make two dollars off of every twelve dollar pizza that you sell.

From there, you take the fixed costs that you business has over a certain period and divide them by the two dollars that you make on every pizza. This would tell you how many pizzas you need to sell in order to break-even over that given period.

The complexity of the formula for how to perform a break-even analysis depends on the variety of your offerings. In the above example, for instance, you would need to factor in the different kinds of pizzas you sell, as well as other food items, but the general idea is always the same.

Cutting Your Company’s Costs

If, after you figure out how to perform a break-even analysis, you BEP is higher than you’d like it to be, you can look at your costs and figure out where you can retool certain aspects of your business in order to lower the BEP.

This can range from raising the prices on your products and services to using the most cost-effective supplies to finding another office space where your rent isn’t as high.

By figuring out how to perform a break-even analysis, you can take variables and put them in place of the actual numbers to try and find the best solution for running your business, so that you can make a healthy profit.

Remember, running a business successfully does not need to be complicated.  Keep it simple!

For more interesting topics on successfully managing the challenges of growing your business profitably, please search our blog at our website www.portalcfo.com.