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Toolkit for success: Introduction

Small Business BasicsSuccess isn't easy.

Things can go wrong very quickly in a small business, but you might not notice problems until after the damage is done -- unless you have a set of diagnostic tools.

These tools measure your performance and spot problems in sales, profits, costs and the use of assets.

The savvy small business owner has five basic types of tools:

  • Time lines
    There's no substitute for writing down the calendar dates and deadlines pointing out your company's intended milestone. Time lines usually are made up of numbers, dollars and dates by which a task should be completed.
  • Ratios
    Your ledgers, journals, balance sheets and other financial documents are full of numbers. Here's where you use them. Stack them against each other in various time-tested formulas and you can use the resulting ratios to measure your success.
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  • Cash flow, profit and loss statements
    Two of your financial statements -- cash flow, and profit and loss statement -- provide special insight into your present financial picture. They address sales growth, days payable, days receivable, cost of goods sold, operating expense, net and cumulative cash flow, net profit and cash on hand.
  • Customer feedback
    Some owners have the attitude that if they don't hear complaints, everything is all right. Not so. It's important to seek out the opinions of consumers -- both those who are and are not your customers. This vital channel of information lets you learn about yourself and your competitors.
  • Employee feedback
    Business owners need to listen to their workers, too. If your employees are not being heard, you have a potential problem. They will notice things in the operation of the business you will overlook.

Between them, these five tools let you look back at your performance, assess where you are today and propel yourself toward a successful future. Read on and you will leave here with an understanding of each tool and how to use it.

 

 

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