Small Business

Seeing the Big Picture


By Karen E. Klein Q: I've just taken over our family photography business, which has been in operation for close to 50 years. It has been a good business and I enjoy what I do. My problem is that I am finding harder and more expensive to make any headway. How can I use an accountant to find out why we are not making money? -- J.J., Ga.

A: The technological advances of the last decade have changed the fundamental dynamics of many industries. As you may have noticed, outfits that equip and support recreational and commercial photography have been among the most profoundly affected, due to the rising popularity of digital cameras, home-computer technology, and graphics programs.

Often, entrepreneurs who have enjoyed success with a particular formula are reluctant to change it. In your case, previous generations have proven their business concept over half a century. Who can blame them -- or you -- for being reluctant to tamper with what has always seemed a good thing?

The problem, however, may be this: While the industry was undergoing a revolution, those who ran your family business may not have been spry enough to change with the times. Your new leadership -- and your willingness to revisit and review the foundations of the business -- comes at a good time, particularly if your efforts won't be hampered by senior family members who might still be involved behind the scenes.

You don't need to be told that a company which is failing to make money is serious in trouble. Sounds obvious, doesn't it? And yet many small businesses limp along, producing a product or service and providing employment for family members, without ever becoming profitable. "Too many business owners think the number of dollars coming in the door, or the checkbook balance, is what finances are all about," says Gene Fairbrother, a small-business expert with MBA Consulting in Coppell, Tex. "The truth is, revenues and bank balances have little to do with financial success. The real issue is not meeting payroll or keeping current with expenses -- it's how much you get to keep at the end of the day."

ASK AROUND. As things change in your industry, your firm's ability to keep meeting payroll may start to slip. Instead of being simply unprofitable, your family legacy will disappear. Before that happens, bring in a professional who can evaluate your firm from top to bottom and give you a "business makeover." An accountant -- someone who plugs numbers into a computer each month and prepares your taxes -- may not be the right person for such a job, unless you happen to know a CPA who specializes in small businesses and knows your industry well.

An entrepreneurial coach or industry-savvy consultant might be a better bet, particularly when it comes to helping you overhaul the way you deliver services and update your product line. So, before making any decisions, do some solid research and get seek referrals from other businesses that have been in your situation.

Meet with the consultant or small business coach to test your personal chemistry: If this person does his or her job thoroughly, you'll be working together closely for quite some time, so it will be vital that you relate well to each other. You can't feel intimidated, which might make it difficult to direct the consultant's work and keep a lid on how much money you are paying them to formulate a plan that will make it possible to reach the goals you have set.

Also, get a contract in writing that specifies what the consultant will do, how long it will take, and how much you'll be paying. Don't rely on vague promises to "turn things around" or "bring in more business." Instead, insist on knowing just what the consultant plans to do and how it is likely to boost your bottom line.

FUNDAMENTAL QUESTIONS. Along with bringing in professional help, it sounds like you should be more aware of your company's overall financial health. Do you know exactly how much the business earned last year? How much are you on track to earn this year? How much revenue you'll make this month? How your prices compare to those of competitors? If you have been monitoring the numbers closely, you should not have to ask why the company is failing to make money -- you should be able to figure it out yourself.

"How many employees don't know to the penny how much they earn?" asks Fairbrother, who adds: "Your business finances should be no different. Know your income, your expenses, your profits, and your losses -- or you will go under before you know it." Have a question about running your business? Ask our small-business experts. Send us an e-mail at smartanswers@businessweek.com, or write to Smart Answers, BW Online, 46th Floor, 1221 Avenue of the Americas, New York, NY 10020. Please include your real name and phone number in case we need more information; only your initials and city will be printed. Because of the volume of mail, we won't be able to respond to all questions personally.


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