Six Questions Every Business Owner Should Answer

At NCH Wealth Advisors, we consult with hundreds of business owners each year. I am always amazed by how many ways my clients have found to make money! Despite the variety of businesses, products, and services, the characteristics of the most successful small businesses are dramatically similar. Across the board, our successful business owners continually answer these six questions about what they are doing. And without fail, when a business owner misses answering these fundamental questions about their business, they miss the success that they envisioned. If you have an existing business and are seeking to reach the next level of success, revisiting these questions with an open mind can help you find the direction you need.

Here are the six key questions I ask people when they present their new business idea to me:

·         Who is your target market? 
The key question here is WHO: who is currently buying this product or service? Do you know where or how they buy this product? Do you know how much are they paying for it? Are they getting the value they want?

·         How will you reach them? 
This is an important consideration. You may have the best product or service on the market, but if you do not have a clear avenue (or avenues) to communicate your unique message to them, how will they know how to find you? Do you know which avenue of communication works best for them? Email, online, radio, television, regular mail, telemarketing, meetings, networking, seminars, and referrals are all ways to reach prospective clients. What type or type(s) of marketing will provide you with the best response from prospective clients?

·         What is your target revenue or production? 
This question is really about cash flow and break even money: how much of your product or service do you need to sell weekly, monthly, quarterly, and annually for your business operation to provide you with the profitability you need to stay in business? And, at what point in the sells do you begin to generate increased margins of profitability? After you answer these questions, you'll know where to begin answering the following questions.

·         How will you deliver those products / service those clients? 
What are the systems and staff you will need to meet your targeted revenues or production? Do you need additional administrative or regulatory staff to meet those targets? What about post-sales training and service needs, who will provide those? And, once you answer these questions, you will need to return to your break even calculations and factor in these additional costs.

·         How big do you want to get? 
This is an important consideration. Do you want your business to be a one-person operation, or do you have visions of a highly-organized team that delivers your services or products under your supervision? Everyone has different skills and preferences in their approach to managing a small business. Those skills and preferences will initially determine how big your business can grow. But what if you want more? Do you know how big your business can grow? What about the market you are reaching with your product or service - is it large enough to support the size of company you want? If not, you must also consider offering additional products or services to your target market, do you know their additional needs?

·         What is your exit strategy? 
Will you sell your business in the open market when you are ready to retire? Do your children want to pick up the 'family business' when you are ready to retire? Will you let your business wind down naturally as you work on it less and less? The answers to these questions will help determine the best legal structures for your business, structures that can save you headaches when you are ready to exit your business. Almost no one thinks of this question as they start a new business, but how you build your business and how you run your business will be different depending on your answers.

When a new business owner answers any of these questions with a blank stare, I know it's a pretty good bet their business won't last for long! Creating detailed answers to these questions will help you identify the best directives for starting your new business.

All of my successful clients have at least an annual planning and goal setting process. They know how much they expect to make this year and what steps are required to get there. They set realistic goals that require them to stretch. When planning together, I always encourage them to overestimate expenses and underestimate income. Then, I encourage them to hold themselves accountable to it weekly, monthly, quarterly, and annually. Revisiting these questions frequently will help you see where your business process needs to be revised and adapted to new or changing conditions.

Without a vision and a plan, your small business is doomed to languish and fail. However, with a clear vision and a realistic, working plan your small business can be one of the most satisfying (and enriching!) things you can do professionally. It may be a tremendous amount of work, but if you put in the work and do it RIGHT, you will be directly rewarded with success!