How To Increase Bottom Line In Business

The basic measures of business are top line & bottom line. Top line is the total revenues that you generated in a business in particular year. Growing top line indicates that your business is growing and not stagnant. It is basically a multiplication of number of units you sold with the unit price. When top line grows, there is increase in at least one of them.

Bottom Line is the basic profit that you made. This comes from top line minus the expenses & purchases. Whatever your top line is, you should have healthy bottom line. Increasing Bottom Line is the basic purpose of business. If you have constant top line i.e. sustainable sales, you can increase your bottom line by decreasing the expenses. If you are not able to increase sales, you should control expenses. You can control them by use of automation, decreasing repeatable tasks, reducing raw material costs, extending credit period thereby decreasing finance cost, think of capital investments so your running costs come down.

Other way to increase bottom line is to increase top line keeping the expenses at current levels.
T.L. - E = B.L.

Above equation will ease your outlook. To increase B.L., increase T.L. or decrease E.

Negotiation Skills - An Art

Negotiation skills are very important in business. The impact that a seemingly small decision can have on your business cannot be undermined. A small difference in paise/cents can give you a telling figure if you just multiply with high quantity & calculate over year. You need to be very clear on how much you can give.

When negotiating you need to understand that there are certain points which you can cede and some which you cannot let go. You should also be clear about the complete picture that the proposal brings. For example, if you are sticking to small/ trivial issue and overlooking big one, you can be in trouble. You cannot overlook the big complete picture and should not consider only short term gains.

Many a times you fall weak in discussion if you show desperation. If you are in need, then you cannot negotiate much. Normal follow up is OK, but if you are following up aggressively, then you show desperation. Even if you have desperation, you should not show it & rather let the other person take action. You should just remind him about yourself so he remembers topic.

Setting Up Business? How To Register?

Having confirmed that you are taking on Entrepreneurship, let us see the first step of Registering the business. You have options of Registering as Proprietorship, Partnership, Limited Liability Partnership (LLP) & Private Limited Company. It all depends on how you are viewing your business in coming years. If you want to keep it small and independent, you should keep it as Proprietorship. If you are having a partner with whom you want to go, go for Partnership firm. But Proprietorship & Partnership firms have one drawback. Just in case you are bankrupt, creditors can claim your property too. You & your business are one entity & not separate. Second, if you are thinking of taking bank loan or venture capital or private equity, you should rather go for Private Limited Or LLP.

If you want to go for supply to big companies or looking for investors then better go for Private Limited company. Since the accounts are audited, investors are willing to invest looking at balance sheet. If you are not willing to make it big, do not go for Private Limited registration. For small businesses LLP, Partnership or Proprietorship is best as accounting costs are also low.

LLP is best combination of Partnership & Private Limited company. Unlike Partnership, the firm & persons are different entities. The liability of partner is Limited to the firms liability. Creditors cannot force you to pay legally. Of course these things come only when you are not genuinely involved in business.

Why Wait For Breakdown?

The topic that I want to focus on is Breakdown.  Though this is primarily important for manufacturing units, it may also be taken up by other firms - be it software, finance, trading, small shops, etc. This is because almost every field employs some or other kind of machine. We are very engrossed in day to day running of the business and hence we are not able to plan a shutdown. If there is no planned shut down, then there will be breakdown. When breakdown happens, there is no option but to correct the machine at the earliest and start the work again. 

What happens in Breakdown? Breakdown is sudden. It will disturb all your planning. You have planned everything pre & post production. Especially if the raw material feed to the machine is perishable in few hours. The manpower will also be idle for the time that the breakdown takes to clear. If the maintenance team is in house, then it is easy. But if you have to call external help then it may take time as they are not in your control. The most important thing is your production loss. That cannot be covered. Man hours are also lost. You may have to bear many losses if everything is put together. And the important thing is that you have to start running the show at the earliest. This gives very less time for repair or maintenance and hence the work is not done as it ought to have been done. 

Can these all things be avoided. Partially, yes. Why I am saying partially is because there are certain breakdowns which might be sudden and out of control. But 80% of the things can be controlled by use of Preventive Maintenance. You have to make a list of all the machines and a daily, weekly & monthly plan for those machines. If you have this plan ready, you will plan for the shutdown and many of the production losses that occur during the breakdown can be prevented. For traders, finance, software people also there are computers and other items which need attention. You can keep a record or outsource it to some third party. They will clean your system from time to time and keep it in order.

Dilemma - Start Early Or Start Late

Have a great business idea in your mind? Waiting for right time to start up? Should you start early or late? Frankly there are no rules and even if there was any rule, there are always exceptions to it.

When you are very young, you do not have any experience of how a business is carried out. You are so raw that people might not believe in you at first. Money is also important. All in all, I must say that if you are just out of college, then you must spend some quality time with some industry so you are familiar with it. You can also accumulate some money so you have some seed money. You also get some time to think more on it and can plan a few things before playing out.

On the other hand if you are more than 40-45, then you are sufficiently experienced and have seen industry from close quarters. If you have been planning for the same, you also have time in which you can accumulate seed money by keeping your lifestyle below what you can afford & by investing in assets which can be liquidated in needy times. At the same time, it is also tricky. Since you have grown senior in your company, you might be getting fat salary and your family has grown big now. If you start up, your salary will stop & your expenses will be pretty high. You must plan so that your savings are there for about 1 year or so.

But if you are in 25-35 group, then time is great for you. Your family is small so you can spend more time with company. You have experience as well as low expenses. Your salary might not be that high when compared with what you might have got after 10 year. I consider this as golden period.

Detach Yourself From Business

Watch the next time when you are watching a cricket match. When some players commit mistake, immediately you say he did it wrong way. Probably he should have played it other way. But the player has been playing the game more than you. He is expert. You are a third person who is not in that situation so you are not bogged down with the responsibility that the player has. You are able to analyze situation better because you are outside it.

The same situation is with your business. We have been running the show for so many days. We begin to think that we have tried all that we could do. You are unable to think the solution of the problem at hand. Imagine a situation where you have a friend and has come to you with problem. You will hear & may be you will give him a couple of possible solutions.

When you are facing a problem, the more you think the more you are stressed. Instead take a break. Go to a pleasant cool place. Detach Yourself from you. Now imagine that some third person has the same problem that you have. Believe me you will immediately come up with 2-3 solutions to your problem. Try this next time when you are facing some problem.

Value Of Customer Retention

Customer is the most important part of our business. He is the reason you exist in the business. If Customer is not there, you simply cannot exist. It is not very easy to gain customer. You have to keep many things right before the first customer comes in and if he is happy, your things are working. You have to keep the customer happy. A happy customer will tell two others and they will come to you to buy the product. But remember that an unhappy customer will tell 100 others and they will not come to you. They may also tell others and your name will simply come down as a supplier.

You have to understand that it is very hard to retain a customer. But if you are able to retain him, you do not have to look further. He can be your regular customer and you just have to serve him each time, so that he is satisfied always. You can find other customers while retaining this one. This will help you increase your business. For example, if you are doing a thousand dollar per month business with one customer and he is happy. You should understand that your 12000 dollar per year is genuine business opportunity and if you retain it, this business will continue. If you add another 20000 dollar per year customer after six months, your 32000 dollar per year is fixed. So, if you find new customer while retaining the older ones your business will grow year-on-year. But if you are running behind new customers and make the older ones suffer then you will lag behind on both the counts. The regular customer may look elsewhere and leave you, while if new customer is not satisfied, he may not continue with you.

Do all things possible to retain the new customer.