Importance of gross margins and fixed costs in small business

As the COVID restrictions are being lifted, small businesses will start to operate regularly, albeit some with less number of patrons/customers due to WFH becoming new normal.

In this new normal situation there will be some higher costs to the business. All small business owners will need to review their costs and understand its effect on their profitability. Some costs are fixed in nature and these don’t change based on turnover. These are, as name suggests fixed in nature. Examples are salaries and wages, Warehouse rent, office rent or lease etc. Variable costs change based on the turnover. Again, there are inventory costs that can pile up if there are issues with turnover. Having a good control over various costs is very important.

It is also important to review their gross margins on all products and services. Also, it is paramount that they do break even analysis to understand the revenue requirements to run their business in profits. Break even analysis can help business owners to have period revenue goals to achieve to be profitable. Once break even sales are determined for the year then that number can be broken down by month and week. It is sometimes can create unnecessary pressure on the business owners to being reasonable with yourself in understanding what is a achievable measure without pushing yourself too hard. Whatever is the chosen way but tracking numbers regularly would give you more control over your business.

Small business owners will need to again embrace entrepreneurship mindset to get their costs under control. There is a distinctive advantage of this mindset, it priorotises success of their business and make them resilient.

#smallbusiness #entrepreneurship #productivity #mindset #profit #focus

4 Important faculties to master to succeed in business

#Success formula for a small business owner or #entrepreneur is in their ability to learn, understand and manage the below 4 aspects.

Firstly they need to work on their #emotionalinteligence. It is their ability to learn, grasp, synthesise, identify patterns, become self aware, self regulate, visualise, understand mindsets etc. Some of it can be born trait but a lot of it can be learnt.

Secondly they need to work on their #strategicplanning and #execution. It is the ability to look beyond few years and objectively set a #vision for their business. Small businesses fail due to lack of this intent. This has to come naturally to them. Business coaches can help them but it is the business owner who needs to see that future vision and they need to believe in it.

Thirdly they need to work on their #financialliteracy. It is their ability to understand how the business is making money. This sounds simple but as the business grows it all becomes complicated. So, by having right financial literacy they can relate back to those basics.

Fourthly they need to work on their #speciality. This might sound too obvious but often either completely ignored or spent all their time on it. With technology disruption this is in constant focus.

#smallbusiness #growthmindset