Small Business Owners and the Financial Records Payoff

Just the other day I had a discussion with a local small business owner on where his money went.  His financials showed he made a profit but he did not have it in his bank account.  As we talked, I asked questions about his record keeping.  He pulled out his checkbook and indicated that was his method of keeping records.  I asked about balance sheets, cash flow and profit and loss and he was hooked to learn more.

Unfortunately, that conversation is not a rarity with small business owners.  Sure when the business started it was easy to track it in the checkbook. But as the business grew, employees hired and increased revenue, a more sophisticated method is usually required in order to better financially manage the business.

Many people feel that ignorance is bliss when it comes to accounting.  If it is not showing then it is not happening.  If only that was true. Many small business owners went into business to sell and make money not do the books.

A tip for business owners is to budget some time each week to go over the financials.  This weekly review will eliminate many of the “bite you in the butt” surprises that often then become a big deal very quickly. This review is part of running the business like a business - not a personal hobby. Owners are encouraged to not enjoy ignorance on their business’s financials. 

Tip two is to keep your growth in check and look for it on the financials.  Nothing eats cash faster than uncontrolled growth of a business. Often, expenses are paid before the sale is realized so that creates a drain on cash. So grow only at the pace the business can afford. 

Tip three is to know your numbers – what does it cost to operate the business daily, the costs of producing the items the business sells, or knowing the utilities.  These numbers are examples of what needs to be known by a business owner to help plan for adequate cash flow. The old saying of “if you can’t measure it, you can’t manage it” is very true here.  Expenses and cash flow are examples of trackable items that can be measured and managed.  In fact, knowing these types of numbers will help the business owner make more informed decisions on everything from growth, hiring, bills etc.

Tip four – knowing your numbers sets the business on the path to success. If a business owner is in control of the finances (numbers) then the business is on a profitable journey.  By managing the finances, the owner knows when to ask for additional funding and has the power to support the request. This knowledge allows the owner to answer the two biggest questions a lender has – 1) are you qualified to do what you say you can do? And 2) are you capable of managing the business?  Imagine the relief of being able to say yes to these questions and having the knowledge to back it up.

Tip five – if managing the business by the numbers is too much to grasp, then enlist the aid of a professional to assist.  Call a bookkeeper or CPA to help or the local Small Business Technology Development Center.  Both are sources of assistance to help understand the financials of the business.

Hopefully, interest is generated to start looking at the business’s financials now.  If questions arise, feel free to contact Richard Proffer, regional business development specialist, at the University of Missouri Cape Girardeau County Extension office at 573-243-3581 to start the conversation.

           

Rural Towns Creating Their Own Economic Vitality

With just under half of Missouri’s counties still not recovered from the 2008 Great Recession, many rural towns are suffering a decline in population, revenue and overall lower quality of life. But there is hope if the town takes action to slow down the decline. 

In an article called, “3 Keys to the Economic Viability of Small Towns,” by Roger Zalneraitis the three activities are: 1) getting people to stop, 2) getting people to live and 3) getting people to work in your community. Most towns can’t handle tackling all three steps at once so take them one at a time and move at a pace your group can handle.

The first one is something that is already happening in the small towns in Missouri, we just need to capitalize on it. If you town has either a gas station, restaurant or hotel, you already have people stopping. The trick is to get the “intentional tourist” to come to your town. That is done by identifying your town’s unique features. It could be the town’s buildings have a unique architecture or a historical event in the town’s past. If you go deep enough, every town has something unique. Find a famous former resident and create a festival for that person like Doniphan, MO did. Once you find something unique, brand it, promote it and celebrate it. The final “celebrate it” is important as that is the why people will come to your town and give the “intentional tourists” a reason to spend money.

The next step is to get people to live in your town. That step may sound harder to do than imagined. But once the town takes inventory of itself, it can start to see where it can improve to attract new residents. Areas to pay attention are neighborhoods and their appeal with desirable and affordable housing. If blight is present, then a plan needs to be developed to remove it. There are many ways to remove blight in a town but it is strongly suggested legal counsel be sought before tearing down any structures.

Then the town needs to look at its schools and crime. It is common knowledge parents won’t live in communities that have poor schools or high crime. Once these issues are identified, work out a plan with the responsible parties to improve them and never let up.

After neighborhoods, schools and crime are addressed, Zalneraitis suggests the town start looking at their quality of life opportunities. Does the town have nice parks or a downtown where people hang out or an arts presence? There are just a few things that new residents look for when selecting a new home. Jackson, Missouri has as its motto, “City of Beautiful Homes, Parks, Schools and Churches.” They obviously recognized the importance of these features to new residents long before Roger wrote his article but the town clearly shows they stand behind their motto. A prospective resident just has to do is drive around town and see the parks, the homes, the schools and churches. Immediately, they will get a feel for the character of the town.

The final step is creating a town’s own economic vitality is to getting people to work there. The old saying, “if you build it they will come,” is very true for this activity. If the town is not inviting to new residents, they will not come and they won’t consider a town without vibes that excites them or does not meet their needs for their family.

With over half of the new jobs created coming from sole proprietors and home based businesses, the town needs to realize and welcome them to the community. The attitude of only wanting big business is a pipe dream for many of Missouri rural communities. Having been a business development specialist for the University of Missouri Extension, I have seen many home based businesses grow into a building employing people. While this growth is slow, it is steady and remains in the local community providing jobs, revenue and city pride.

How can our rural towns help new business owners feel welcomed? They often do not have the resources of bigger urban centers but they do have something that the urban option usually does not have – a spirit of cooperation and civic pride. Many rural towns have the opportunity to create public-private partnerships by providing space, shared resources and a willing workforce. Civic pride is another area because locally grown is often locally brought which helps the business grow and in time help the community grow.

While these three strategies are not the sole solution, it is a start for many small towns that cannot afford an economic developer. If you have questions about how the Community Economic Development program of MU Extension can help your community, feel free to call me, Richard Proffer, at 573-243-3581 or email me at profferrd@missouri.edu.