We, as business owners, tend to work “in” our business, rather than work “on” our business. The tyranny of serving the customer’s needs, in a lot of instances, robs us of our ability to sit back and evaluate our business and how it operates.
With many businesses temporarily closed and with most of us confined to our homes, now is a good time to re-evaluate your business and how it operates.
Here are 10 things that you may want to think about while your business is in “pause” mode:
- Review your customer base. Do you have many customers, or is your business dependent on one or a few large customers? If it’s the latter, look at ways to diversify your customer base so that the loss of a large customer doesn’t cause an unmanageable drop in cash flow. If it’s the former, are you spending a large amount of time on customers that require a lot of attention but produce very little? Perhaps by “firing” that customer, it will free you up to work on customers that are productive.
- Review your customer relationships. Have you done this lately? How strong are they? Who, in your business, controls those relationships? You may want to use this down time to strengthen those relationships.
- Evaluate your labor force. Is the size and mix of your workforce the most efficient and effective for your business? Are your employees in positions that play best to their skills? Is your compensation structure competitive and designed to incentivize your workforce? Do you have proper employment agreements with your employees? Are your independent contractors really independent contractors?
- Examine how your business cash flows. Are you using a line of credit, or is the business cash flowing itself? If you have a true line of credit, are you using it as such, or should that line really be handled like a capital loan? Are you actively managing your payables and receivables in order to maximize your cash flow?
- Evaluate your accounting practices. Is it time to upgrade accounting software? Is your accounting software properly set up for your business? Are you receiving the proper accounting help and advice? Are you considering the impact of taxes on your business? Do you get advice about the tax consequences of potential activities or transactions before entering them? Activities and transactions designed to achieve certain goals and objectives can be structured in myriad ways, but not all produce the same tax consequences. Upfront tax planning can result in achieving your goals and objectives but in the most tax effective way. In a similar vein, are you considering the impact of taxes on your personal returns and the possible interrelationship between your business’ tax situation and your personal one? Again, upfront tax planning is often key to producing the best overall economic result.
- Evaluate your fixed assets. Are the fixed assets and equipment being used in your business in need of replacement or repair? This down time may be a good time to do either, if cash flow allows. Is a piece of equipment more of a problem than it’s worth?
Are there better and more affordable equipment options out there that can make your business more efficient?
- Evaluate your legal structure and documentation. Is your business structured properly? Does it have the proper legal documentation that will protect your business if it is sued? Are your customer and vendor contracts solid and in order? Have you done your own estate planning?
- Evaluate your business’ insurance needs. When was the last time you spoke to your insurance agent? Does your business have the proper insurance coverage for the type of activities it is engaged in?
- Evaluate your physical location. If you are leasing, does your space fit your needs for the right price? Are you paying a market price for rent? If you own, are your real estate taxes in line with similar properties? Has your property’s assessed value been unreasonably increased lately?
- Evaluate your exit strategy. Have you planned for how you will get cash out of your business? Do you want to pass it on to your children? Do you want to sell it, and, if so, to whom?
We’d be happy to help you navigate through any of these opportunities. Give us a call to get started!
Don Spagnolo & Kristin Hoeksema
Spagnolo & Hoeksema, LLC