At some point, your company is likely going to have to decide whether it makes more sense to lease a property or building or to buy a piece of real estate. If the owner of the building you’ve been leasing decides to raise the rent at the end of the lease term by a considerable amount, buying another property might seem like the better choice, because at least the monthly mortgage cost will remain fixed and your company would be building equity in the property. But, there are other things to think about, beyond the cost of the lease versus the cost of a mortgage.
Buying real estate isn’t something your company wants to rush into. It is worth it to look at a number of factors first, and to weigh the pros and cons of those factors, before you decide to keep renting or to purchase property.
You Like the Location
One of the biggest considerations when deciding if it is the right time to buy is the location of the property. Location matters for several reasons. From a practical standpoint, if you are going to buy real estate, you want the property to be in an area that is easy for your customers and vendors to get to. If the choice is to buy a store front in an out-of-the-way location that is difficult to find or to continue to rent a store in a busy mall, the store in the mall will most likely win out, even if it has a higher monthly cost.
The ease of finding and getting to the property is just thing to think about. You also want to consider how accessible the location is. If you live in an area where many people drive instead of take public transit, is there a fair amount of parking near the property? Will people have to pay to park on the street or in a lot that is a block or further from the building or is there a parking lot on site?
Finally, you want to think about your company’s investment in the neighborhood. Can you see your business growing and thriving in the area and continuing to be there in the years to come? Or, is your ultimate goal for your business to move to a different part of the town or city you’re located in or even to eventually move out of state? If you aren’t planning on staying in the same spot for several years, buying property might not make as much sense for your company as continuing to lease a property.
You Have the Liquidity
While buying business property can cost you less in the long run, and can help your company when the value of the property increases, it is usually considerably more costly upfront than renting. Your business will most likely need to put a significant amount of cash down before you can get a mortgage. It’s useful to examine your company’s finances to make sure that you have the liquid assets needed to make a down payment on the property and that tying that cash into real estate won’t make it challenging for your company to reach other goals or won’t negatively impact your business if you run into cash flow issues a few months or years down the road.
You Have the Right Team
If you are considering buying real estate for your company or wondering if it is the right time to buy, it helps to have a knowledgeable team on your side. A virtual CFO can help you better understand your company’s finances, for example, and help you determine if buying is the best move to make financially. A real estate agent or broker can help you see what properties are available and whether they are within your company’s budget or otherwise meet your company’s needs.
New Direction Capital can help you put together a plan for your company’s future, whether that plan includes purchasing real estate or not. To learn more about how we can help your business with its strategies and plans, contact us today.
04 Jun 2015
As a business owner, you’ve probably gotten plenty of advice on how to reach your goals and on the importance of tracking your business’ growth and performance. But, if you aren’t sure what your company’s goals are, working on achieving them or on tracking its growth can be a moot point. The goals you set for your business do depend on what you hope to achieve for the year. You might wish to strengthen your team and to focus on reducing turnover or making the right hiring decision from the start. Or, your goal might be focused on the value and productivity of your company and on ways to raise or increase capital.
Who you hire can have a big impact on the health of your company. If you’ve had to deal with not-so-great employees in the past or employees who quickly find a new position and move on, taking a close look at your recruiting process and making it a goal to improve it can help save your company money and stress over time. You can also set a specific recruitment goal for each quarter or for the year. Your goal might be to hire a team of developers to improve your company’s website or to make it more user-friendly.
Part of your goal to improve recruiting might be to better screen candidates before you offer them a position. In the case of a team of developers, you might have them take a test to see if they really have coding skills and are actually able to do what they say they can do.
Keep Employees Happy
Along with setting a recruitment goal or a goal to improve your hiring process, your company can also benefit from having a goal to improve your current employees’ happiness and job satisfaction. Take a look at your company’s turnover rate. If it is higher than you would like it to be, find out why people are leaving. It could be that your company’s leave policy is less generous than that of similar companies and that employees are moving on because they need something more flexible. It could be that the benefits offered by your business are fewer or less satisfactory than what an employee can get a similar company. Employees might feel that they don’t have much room for growth with your company and might move on to a business that offers upward mobility.
There are a number of ways you can work towards the goal of improving employee satisfaction and happiness. If your team feels separated or cut-off from each other, your goal can be to build more camaraderie in the office by having the occasional happy hour or employee retreat. If people want to work at a company where they are able to grow and move up in their fields and positions, you can make it a goal to sit down with each employee and create a plan for where they want to be at the end of the year or at the end of several years.
Make Your Business Operations More Productive
It remains true that time is money, and increasing productivity at your company can help to increase its value, both to your clients and to your employees. Making your company more productive means that you do get more out of less. There are a few ways to go about boosting productivity. One is to set a target and goal for each meeting or project. No one should wonder why he or she is sitting in a meeting or what the end result of a project is meant to be.
Most likely, your company will need capital to reach any other goals it has or to continue to operate. Examining ways to raise capital and the best resources to tap into to get that capital are essential for the overall success of your business. Your goal can be to try to find a new source of funding during the year or to continue to develop a relationship with an investor or other source of financing.
Before you can work towards achieving your goals, you need to have a clear idea of what those goals are. If you are unsure what the next step to take is or how to clearly delineate your goals, the team at New Direction Capital can help. Contact us today and get started on planning your company’s goals.
Image courtesy of bplanet at FreeDigitalPhotos.net
What are some of the things you’d like to achieve this year? Does it include raising capital or keeping employees happy? We’d love to start a conversation so feel free to comment below!
28 May 2015
Revenue — it’s the amount of money your company brings in, through sales and services, before anything is taken out, such as the cost of a product or the expenses associated with it. Keeping track of revenue is a must if you want to your business to thrive and meet or exceed its goals. How your company tracks revenue matters, as well. The best companies use systems that give them a clear idea of what areas are working, what areas need a little help, and what areas are dragging the business down.
Methods that Work
One of the best ways to track how much money is coming into your business is to divide your revenue into a number of different streams, based on the source of the income. If necessary, you might want to create categories based on location, too. For example, if you run a company that distributes produce and that has two warehouse locations, you can create a category for the amount of vegetables sold at location A, the amount of vegetables sold at location B, the amount of fruit sold at location A, and the amount of fruit sold at location B, and so on.
Dividing your revenue streams into categories allows you to see what areas are helping your business and which are not. Location A might not bring in a lot of revenue from vegetables, but might bring in twice as much revenue from fruit than location B. Knowing that can help you decide to reduce the vegetable side of the business and focus on fruit, for example, or decide to dedicate location A to fruit and location B to vegetables.
While creating some detail about each revenue stream is important when it comes to helping you see what aspects of your business are bringing in more income than others, it’s also important that the system you use not become too complicated. In the case of the produce distribution company, it might seem that it makes sense to further divide the fruit category into apples, oranges, exotic fruits, but getting too detailed can end up complicating things, making it more difficult to see what is working for your company and want isn’t. Making each category very specific can also distract your from the larger picture. Apples might be more popular than oranges, but that doesn’t mean you want to stop offering oranges to customers, for example.
Analysis of the revenue should go hand in hand with tracking it. Once you know the amount of revenue your company brings in, you can begin to focus on ways to increase it or to maximize its value. In the case of the produce distributor, for example, vegetables not only bring in less revenue at location A than fruit, they cost the company more. In that instance, the business owner might actually not only improve revenue, but also profit, if he or she decides to focus that location on fruit sales and reduce the amount of vegetables bought and sold. Had the business owner not separated the revenue into two separate categories, he or she would never have been able to see that the vegetable side of the business was holding the company back.
Goals and Next Steps
Tracking revenue not only gives you an idea of how much money your company is bringing in and whether it’s able to bring in enough money to cover the business’ expenses, it can also help shape your company’s goals and help your company make the next steps needed for growth.
Working with a virtual CFO, such as the team at New Direction Capital, allows you not only to increase your company’s revenue but also to find ways to make the most of that revenue so that the business can move forward and continue to grow. Learn more about revenue tracking and achieving business growth by contacting us today.
21 May 2015
How well is your business doing? Measuring your business’ performance and success means looking not only looking at how it stands financially, but also taking a close look at how it is doing in a number of other areas, such as customer satisfaction and retention and employee turnover. Knowing where your company stands today allows you to plan for its future, whether you hope to expand the business or increase profits.
Set Goals and Priorities
Before you can measure anything, you want to have an idea of why you are keeping track. Otherwise, you are collecting data that serves no purpose.
Setting goals and determining what your business’ priorities are will give you an idea of what you need to pay attention to. For example, if you’ve been losing clients or customers, and want to reverse that, you will most likely want to take a close look at customer service at your company. If your goal is to increase revenues by a certain percentage, you’ll want to examine the financial state of your business, including what money is coming in and where it is coming from. If having to constantly hire new staff is costing your company a lot of money, your goal might be to reduce turnover by a certain percent.
Use Key Performance Indicators
Once you know what you are aiming for, the next step is to determine the best way to measure. Key performance indicators (KPI) are simply measures that your company can use to see if it is on track when it comes to reaching its goals. The KPIs that are relevant to your company will vary based on what you intend to measure and what your company’s goals are.
For example, if your goals focus on the financial side of your company, the KPIs that matter to you might be the net profit margin, the return on assets, or the return on equity. The net profit margin lets you see how much profit your company brings in compared to its revenue. It’s your net profit divided by revenue.
Your goal might be to increase your company’s net profit margin to a certain percent within five years. Knowing what the margin is for the past few years will give you a sense of whether your company is on track or not, and can give you an idea what needs to be adjusted. You might need to increase revenue, for example, or find a way to decrease your costs or expenses so that your profit goes up, even if your revenue does not.
Performance isn’t based on finances alone, but if certain other areas of your company are floundering, you might start to see an impact on the financial side. For that reason, you might set goals to increase customers or to increase customer retention. Your company’s goal might be double your customer retention rate or to double the number of new customers. In that case, the customer retention rate is a useful KPI to track. To figure it out, you make note of the number of customers you had at the start and end of a period, such as a month or quarter, plus the number of new customers gained during that time.
Subtract the number of new customers from the total number left at the end of the period, then divide the difference by the number you had at the beginning. If you ended the quarter with 500 customers, started with 550, and gained 50, your retention rate is about 82 percent, meaning you lost 100 customers. If your goal is to increase that percentage to 100, you’ll either want to focus on keeping the customers you have or on finding ways to replace the ones who leave.
To know where your business is going, it helps to know where it currently stands and where it has been. At New Direction Capital, our goal is to work with you and help you determine which performance measures will help your company get to the next level and continue to grow.
14 May 2015
No matter what industry your business is in, the field is most likely crowded. Even in a small town or city, there might be hundreds of companies offering what seems to be the same service. Think of all the certified public accountants you see advertising during tax season, or even the number of pizza restaurants located along the same stretch of road.
In a crowded field, one of the more pressing issues for your business might be how to stand out from your competitors. Focusing on what makes your company different from the others will help it stand out in a crowd.
Find Your Niche
Standing out from your competition means finding what makes your company different from the others. You might be selling products or offering a service that is very similar to what your competitors are offering, but your method of doing so differs or you’ve found a niche area that the other companies don’t address.
An example can be seen in a company such as Everlane, an online clothing store that focuses on basics, such as T-shirts and sweaters. There are hundreds of other companies that sell the same products as Everlane, but they don’t sell them in the same way. The company focuses on transparency, providing a description of the factories the garments are produced in and breaking down the cost of each garment, as well as the profit the company earns. Since it only operates online, the clothing company is also able to offer high quality pieces to customers at much lower prices, as its overhead is much lower.
Part of carving out a specific niche is deciding what you want people to think about when they think about your company. You can set yourself apart from others in your field by offering a higher quality product, by offering a product that is somehow different from the others, or by working to establish your company’s authenticity with its products. If you provide a service, your positioning and niche might be that you don’t give up until your client is completely satisfied or that you work until the problem is fully solved.
Take a Different Approach
In addition to finding a niche, your company should take a somewhat different approach to the services it offers or the products it sells. Take a look at what similar companies are doing and find what is missing.
For example, if similar firms in your area sell their services as part of a package, you might consider selling your services on an hourly basis or a la carte. Doing so opens up your firm to a new segment of clients, who might not want a package deal or who might only need your services for a few hours at a time. If you are selling products, you might consider offering a more relaxed return policy than similar companies.
Get to Know Your Clients
One way to figure out how to take a different approach or what niche your company can fill is to find out what your clients or customers want. For example, for some customers, price is more important than quality, while others are willing to pay more for a product that they think is high quality and will last them for years to come. Knowing that some customers want value and others want high quality will help you tailor your products or services to meet their expectations.
Knowing your customers and clients can also help you stand out. A customer might want a specific service that he or she can’t find anywhere else and ask you to provide it. If you do, instead of thinking of that service as a one time situation, consider adding it to your repertoire.
There may be a lot of businesses out there, but only one (or a few) of them is yours. Determining what makes your company great and different from the rest will help you stand out in a sea of similarity. The team at New Direction Capital is committed to working with your company to help it find a way to stand out from the crowd. Contact us today to learn more about how we can help you.