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Archived Tips for Success
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Opportunity Cost
What is opportunity cost and how does it affect your
business?
Think of the things that you do well and are paid for. How
much revenue would those things bring to your business in the same period of
time that it would take you to do a task that can be delegated or contracted out.
For example:
Data entry is time consuming for you to do but is a
necessary part of your business. You are not especially fast on the keyboard
so it takes you longer than someone who is doing this kind of work on a regular
basis. Entries take you ten hours to complete. Your time is billed out at
$50.00 an hour, so technically you could have earned $500.00 in the same
period of time. Contractors who hire out to do this type of work can get the
same amount of work done in six hours – they charge $20.00 per hour for a total
of $120.00.
Your lost income: | $500.00 |
Contracted price: | $120.00 |
Opportunity cost | $380.00 |
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It’s true that you can still do the work if you work longer
hours and it won’t cost you any money, but it will still cost you. You can use
this time for marketing your business and increasing your circle of contacts
and clients if you don’t want to have time to rest. Eventually lack of rest is
going to catch up with you and some virus may find you a very susceptible
host. Three days lost work time at 50.00/hour $1200.00. How much money did
you really save?
Another way to look at this is to calculate the amount of
time it takes you to bill out small items to a client. It takes you
approximately one hour to go through your telephone log and add the amounts to
the invoices. Your time valued at $50.00 has now been used to bill out $15.00
of telephone charges. You can expense the entire amount from your income tax
so why cost yourself $35.00 to bill your clients?
Working smarter with resources that are available to you
will balance out your business and improve your lifestyle.
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Your inventory assets
turn into liabilities when they don’t convert into cash.
If your inventory has been sitting
on the shelf for a long time (six months or more) there are a few things you
need to do:
Ø
Analyze why these items are not
selling
·
Seasonality
·
Trend or fad items
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Pricing not competitive
·
Location or display visibility
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Overstocked on normally slow
movers
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Outdated or out of style items
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Marketing
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Ø
Mark down old stock items and have
a clearance sale.
Ø
Do comparison shopping to see if
your pricing is on par with others.
Ø
Gain product knowledge by talking
to your suppliers and their sales representatives.
Ø
Track your sales regularly to see
what’s moving and place stock orders based on that information.
Ø
Listen to your staff input.
It’s time to open the door
for new ideas and opportunities.
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What you can
do to reduce S.O.H.O. stress at income tax time.
Most Small Office Home Office businesses take
their information to a professional for tax return preparation. If you have
not already implemented an organized system for your records here are some tips
that will save you time and money.
This year before you see your income tax
professional:
-
Get organized. Sort your information into
separate file folders that are labelled according to Expense and Revenue
types.
- Create a separate folder for your GST, Income
Tax, Bank Statements, Bank Loans, Credit Card Statements, Charitable
Receipts, Investments (RRSP, GIC, etc.), and Medical Receipts. (The
medical receipts may be used for your personal income tax.)
- Store the folders in alphabetical order in a
portable accordion file folder or banker’s box (depending on how much
paperwork you have). Label with your name and contact information.
- Make sure that all related documents are
accounted for. E.g. Utility bills for each business month are in the Utilities
folder. Bank loan information should include interest expense
information, etc.
- Be realistic about your expenses and get rid of
all receipts that are not business related. Revenue Canada will not allow the following expenses for most of us:
a)
Hair cuts
b)
Dry cleaning
c)
Holiday excursions
d)
Pet expenses
e)
Clothing and jewellery
- Include your mileage log or the number of
kilometres travelled for business. You will need this to determine how
much of your Vehicle Insurance, Vehicle Maintenance, and Gas/Oil can be
expensed.
- Make a list of all business equipment purchased and/or
discarded this year.
- Make a list of
any accounts receivable invoices that might be uncollectible.
- How many rooms are there in your home and how
many of those are used for business? This information is required to
calculate the percentage of business portion of expenses.
- Invest in an RRSP or increase your contribution total
before the February deadline if your budget allows.
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For your next
business year:
Ø Start at number one from the above list and
keep on top of things to avoid last minute panic.
Ø Buy a user friendly accounting package like
Simply Accounting or hire someone to keep your accounting records up to date, so
you can get a better handle of how your business is doing.
Ø Keep your business and personal
transactions separated as much as possible.
Ø Keep the number of business credit card and
bank accounts to a minimum. With each account that you have, additional time will
be required to reconcile information, which in turn will cost you more money.
Ø Start your RRSP program if you haven’t
already done so.
Ø Apply for a GST number if you have not
already got one and your projected sales for this year will be over $30,000.00.
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Your most
valuable assets are not listed on your balance sheet.
Studies have
shown that most employees require at least three months training to function in
their position cost effectively. With current demands in the labour market
there need to be incentives for employees to stay with employers. What can you
offer your staff to gain their loyalty?
Ø
A safe and comfortable workplace. Adequate
light, heat, and ventilation are essential for good performance indoors.
Vehicles and equipment should always be maintained for safe operation. You
will lose more than an employee if an accident occurs and you are found at
fault.
Ø
Appreciation for a job well done. “Thank you”, “You did a great job today”, or a lunch on the boss works wonders.
Ø
A friendly atmosphere where work can be fun
too. Employees who are always afraid of doing something wrong will make more
mistakes than those in a more relaxed atmosphere. Staff turnover rates are
significantly lower where workers enjoy their environment.
Ø
Consideration and respect for the feelings of
the individuals you employ. Employees should never be berated or belittled in
front of their co-workers. They should be taken aside and asked for their side
of the story when a problem occurs. If there was an error in judgement they
should then be shown how the situation could have been dealt with in a better
way.
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Ø
When employees approach with suggestions or
ideas for improvement, listen to what they have to say. By listening to them,
you show that you value their opinions and make them feel like part of the
team. You may even benefit by implementing some of the plans offered. Huge
corporations were not built solely on one person’s ideas or ingenuity.
Ø
Promises you make to your customers and staff
have to be kept in order to build a relationship of trust.
Ø
Rewards for employee of the month, promotions,
and bonuses for exceeding expectations, are just a few other ways to show that
you value your employees. |
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Your business plan needs revamping from time to time.
So many variables could have changed since your first business plan was drafted, from a business standpoint as well as a personal one. Nothing has been set in stone so changes made are not an indication that your original document was poorly planned. In fact it is possible that circumstances are more favourable than were originally anticipated. Some things to think about when you are considering revisions to your original plan are as follows:
Ø Have your goals changed and if so where do you want to be in the coming years?
Ø Has your market changed significantly enough to affect your business plan?
Ø Has your target market changed radically? Is the range greater or less than originally planned?
Ø Have your marketing plans been successful – if not, what might work better?
Ø Has your rate of growth met or exceeded your projections?
These are just a few of the things that should be reviewed on a regular basis to keep you and your business on the right track.
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Copyright © 2005-08 Grassroots Business Development. All Rights Reserved
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