If you’re planning to open a manufacturing, wholesale or retail business, you’ll be likely be carrying inventory. Even pure service businesses carry some “inventory,” more appropriately called “supplies” – like report covers for client materials, high quality report paper, photographic paper and so on. These items are not inventory in the strictest accounting sense, but you still need to manage on-hand quantities to make sure you can conduct your business activities without having to constantly run out to replenish your stock.

How much inventory should you keep on hand?

To help reduce costs and improve profitability, many small businesses carry the minimum amount of inventory necessary to run their business, instead of carrying large amounts. Purchasing inventory more frequently also helps them to remain competitive. Of course, some inventory must be carried all the time – the trick is to know what items should always be on hand and in what quantities. It’s hard to estimate this until your business has operating history, so keep good records of what you tend to buy most often over the first few weeks. Carrying only the inventory you need, when you need it, is known as “just-in-time inventory.”

Tips for successful small business inventory management

The goal of just-in-time inventory is to eliminate waste. Customer demand determines how much product gets produced, the number of products to be produced determines production capacity, and production capacity determines the amount of raw materials you need to purchase. For just-in-time inventory management to work, there need to be severe penalties for members of the channel who don’t meet their obligations (such as late deliveries), and there must be good communication between members of the channel – customers, retailers, wholesalers, and manufacturers.

Avoiding carrying inventory is a trend in business that’s expected to continue for many years. Proper efficient inventory management is one of the operation process skills that you’ll need to develop quickly in order to stay competitive.

Do you have any inventory management tips to share?

We found some great posts on other business blogs around the web this week. Here are some of our favourites – let us know what you liked this week!

• Then Comes Generation Z at The Entrepreneurial Mind
• Team Building: Getting the Message Across Without Micromanaging at Small Business Trends
• How Not to Be a Spammer When Marketing Your Business at Entrepreneur
• Business Myth #1 – Your Work will Speak for Itself at Small Business BC
• Networking Tips: Go From Awkward to Awesome at Inc.com

Last week we talked about an operations process – namely, what it was. As you may have guessed, the operations process of product and service businesses differ in a few important ways.

Operations process for service vs product businesses

In last week’s post, we looked at the operations process for a flower shop. The owner Lauren’s main “output” is flowers, a product. But what if your business is, for example, a consulting business – a service?

Inconsistency of output

The first major difference is that services have the possibility of inconsistency of output with a service. We’ve all had a bad haircut – perhaps the stylist didn’t have much experience, knowledge or skill, was just having a bad day, or truly wasn’t cut out (sorry) for this line of work. The result? A hood, scarf, paper bag until your hair grows back – a bad customer experience. It’s very challenging in a service business to make sure that each and every customer experience is the same. All the more reason to carefully and thoroughly train your staff and hold them accountable for producing the standard of excellence in service delivery that you’ve set for your business.

Service intangibility

Another difference between product and service operation processes is that customers can’t see, touch, feel, evaluate, or experience the service prior to it being produced. This is known as service intangibility. With a product, you can pick it up, roll it around, evaluate it, decide if you like it before you buy it. You can’t check out that new ‘do, however, until it’s too late. Thanks to website technology, new hairstyle websites allow you to upload a photo of yourself and drag and drop different hairstyles onto your head in the photograph – a “try before you buy” approach. This reduces the intangibility of services, and helps service businesses achieve the right customer experience.

The problem of inventory

Unlike product companies, service businesses don’t carry inventory. You can’t put a haircut on a shelf and hope it will finally sell tomorrow. Service businesses must learn to level out demand during off-peak hours to maximize the efficiency of their operations. For example, if a hair salon noticed that very few customers came in for a haircut between 9:00am and 11:00am, the shop could offer “early bird” discounts or senior’s discounts to encourage those who might be more available to travel to the salon at that time of day.

Inseparability of services

In a product business, the manufacture of the product was likely performed somewhere else, by someone else. With a service business, the service provider is the business. The hairstylist who performs haircuts really is the business. It won’t matter much to you, walking out with a paper bag over your head after a bad haircut, that the receptionist was friendly, that the coffee was good, or that there was lots of parking. The impact of incompetent or rude service providers is felt directly by the customer. You may not get a second chance with customer experience.

If you’re planning to run a service business, you’ll need to bear these differences in mind. As you review your customer experience and operations process models, think about how will you handle intangibility, inconsistency, lack of inventory, and inseparability of services. Think about how you will handle these differences, while ensuring that your customer experience is the best it can be.

Our word of advice – always put yourself in your customer’s shoes. Will it make sense to the customer? What would the customer think? WWTCT?

You may have heard the phrase “operations process” in relation to small business ownership before, but what is it exactly?

Basically, operations processes transform inputs to outputs. Inputs are things like raw materials, labour, equipment, information, and money. Outputs are products or services, as well as the level of customer satisfaction people have after they’ve purchased from you. Operations processes are different for retail, manufacturing, and service businesses – but the underlying idea is the same for all businesses, big and small.

Want to see it in action? Let’s use a flower shop as an example. Lauren, the shop’s owner, has to transform cut flowers, ribbons, wire vases, florist time, knowledge, and other resources into a deliverable flower arrangement. This arrangement must be packaged with a card delivered to the right person at the right time, and make the customer happy. All of this is Lauren’s operations process in action.

Here’s a closer look at the different components of Lauren’s operations process. She must:

• Purchase the right flowers from the right suppliers (purchasing);
• Have those flowers delivered at the right time in perfect condition to the shop (materials management);
• Make sure to have a trained florist on hand to assist customers (knowledge, labour and production);
• Create the floral arrangements in such a way that they are consistently high quality and works of art (quality control); and
• Ensure each and every customer is thrilled (customer satisfaction).

As you can see, an operations process is linear. The inputs go through a transformation stage and become outputs.

Every business undergoes some version of this process. Some companies are better at it than others, which becomes a competitive advantage for those small companies that learn to do this well. Each component of your operations process must be managed, measured for efficiency, and tested for effectiveness.

Next week we’ll talk about how the operations process differs between services businesses and product businesses. See you then!

Do you think you need to be an athlete yourself to run a successful sports business? You don’t. Take Mark Cuban, for example.

In the early 1980s, Cuban was one of the top salespeople at Your Business Software, one of the first PC software retailers in Dallas, Texas. He held that job for under a year, until he was fired when he met with a client to finalize a large software purchase and couldn’t open the store.

Many of us would be knocked back by an incident like that. However, Cuban used his knowledge and foresight to start his own company – MicroSolutions. It was an early seller of programs many of us know today (or, at least, knew in the past) like CompuServe and Lotus Notes. Despite his almost total lack of an IT or computers background, Cuban was able to stay one step ahead of the game in that industry, testing every new innovation that came his way. His company was an expert in local area networks at a time when computer printers were just becoming popular. In 1990, Cuban sold MicroSolutions to CompuServe for $6 million.

Five years later, inspiration struck again, and he merged his tech company experience with his love of sports. He cofounded AudioNet, a website that allowed sports fans to listen to their home teams’ games – no matter where they were. This company became Broadcast.com, which was sold to Yahoo with almost $100 million in revenue and 350 staff members.

In 2000, Cuban’s next business move was further inspired by his love of sports – he bought his hometown basketball team, the Dallas Mavericks. He combined his knowledge of basketball with his business knowledge and revitalized his team. Aside from recruiting more talented players, he refocused the team’s marketing efforts with new uniforms and new advertising strategies. He has even been known to sit with other fans in the audience, wearing a team jersey. By repackaging a Mavericks game as a total entertainment experience, Cuban brought the team to heights of popularity they hadn’t seen in years – with both fans and players.

With his actions in previous business ventures and as the owner of the Dallas Mavericks, Mark Cuban has truly been a creative destructor. Though no stranger to the odd controversy, he’s approached each business venture with creativity, forward thinking and true passion. Not all sports fans can own a basketball team, but sports-related entrepreneurship is definitely a viable option, even if your background would make it seem otherwise!

At GoForth Institute, we’re entrepreneurs too. We’ve been through it all, and many of us have had more than a couple of small businesses. We know that entrepreneurship can be an invigorating, freeing journey, but we also know that it can be one of the toughest things you can do.

The downsides of small business ownership aren’t often discussed honestly, and many of us can sometimes be unwilling to admit that our particular entrepreneurship journey might be at an end. Of course, we’d want everyone to love their small business, but we know that sometimes that love can run out. So, how can you tell if it might be time to end your small business? Here are some signs:

• You’re hemorrhaging money. It can take up to three years for a small business to turn a profit, but if you’ve tried everything and still see your money slipping away faster than it’s coming in, it could be a sign.
• Your relationships are suffering. If you’re so stressed that you’re taking it out on your loved ones, or work so much that you never see them, it could also be an indication that it’s time to close up shop. However, it could also be an indication that you need to hire some help!
• You’re bored. When you started your small business, you were thrilled by it and spent every waking hour dreaming and planning. Now, though, you have no more ideas and are just running on fumes. Could you benefit from outside help with planning?
• You dread going to work. If the thought of another work day makes you feel miserable, that’s not a good sign. Analyze this feeling. Would a new direction for the business help? Some new employees to take the load off? Think about what it would take to make you love your small business again, and plan out all options.
• Your health is taking a turn for the worse. If the pressure and stress you’re feeling about your small business is taking a toll on your health, then something’s not right.

If you answered ‘yes’ to one or two of these things, you may have a problem – but that doesn’t mean closing the business is the only solution. This problem could be solved by new staff, for example. And as we said above, most businesses don’t become profitable until about the third year of business, so we usually don’t advise throwing in the towel after, say, 14 months. However, if you’re starting to feel like maybe you want out, take it seriously. Take time to analyze all options available to you, to make very sure this is the best course of action. If you haven’t already done so, plan your exit strategy and tie up all loose ends. And once that’s all finished, regroup, reflect, and plan for your next small business!

No matter what stage of business you’re in, comprehensive small business education, like the kind offered by us at GoForth Institute, may help you find success. Knowledge is power!

Home-based entrepreneurs are self-employed, working alone or with few employees. Flexibility and autonomy are what these business owners crave. Having the freedom to do things like arrange a child’s dentist appointment, or take the family dog for a walk at lunchtime, is a must. Companies run by home-based entrepreneurs typically don’t have a storefront, street advertising signs or customer parking. Entrepreneurs working from home may have an office, studio or workshop, depending on their business.

Sounds great, right? If you think starting a home-based business might be ideal for you, here are 43 small businesses you can start from home:

• Bookkeeper/accountant
• Photographer
• Writer
• Editor
• Graphic designer
• Web designer
• Web developer
• Event planner
• Visual artist
• Crafter
• Marketing consultant
• Bicycle repair
• Financial planner
• IT consultant
• Hairstylist
• Manicurist
• Personal shopper
• Virtual assistant
• Transcriptionist
• Personal trainer
• Tutor
• Massage therapist
• Bed & breakfast
• Daycare
• Clothing designer
• Dog walker
• Jewelry designer
• Ceramicist
• Pet groomer
• Music instructor
• Bag designer
• Notary public
• Language instructor
• Home organizer
• Interior decorator
• Business coach
• Alterations or sewing
• Personal chef
• Caterer
• Computer repair
• Personal assistant
• Wedding planner
• Carpenter

I’m sure there are a few that can be added to this list. As always, your friends at GoForth Institute encourage you to thoroughly research and plan when starting any small business. Entrepreneurs starting a home-based business should be especially wary of scams and opportunities that sound too good to be true.

Good luck, and have fun!

For more tips on starting and running a home-based small business, check out these posts:

How to sniff out a home-based business scam
You should sell these! How to start a business selling your handcrafted work
Perks and snags of internet or home-based businesses
Home-based business permits and expenses

A website for your small business can be an incredible marketing tool. These days, when someone wants to know something about a company, their first move is often to search for it online. Your small business’ website provides a nearly real-time snapshot of your company, its goals, its products and services and – most importantly – how your customers can find you.

So, how do you create an effective website for your small business? We’ve got a few things to keep in mind.

Keep your small business’ website user-friendly

You don’t have to make your small business’ website look like everyone else’s, but there are a few things that are generally recognized as best practices. For example:

• Keep your text and background colours calm and easy to look at. Blue text on a black background does nobody’s eyes any favours.
• Ensure your website’s navigation is concise and makes sense. Avoid having 15 pages crammed into three menus, all of which are in different locations on the page.
• Get your website content in order. Readers should be able to find exactly what they’re looking for without wading through pages of text.
• Make sure your website loads quickly and doesn’t make readers jump through hoops to get to what they’re looking for – avoid intro pages or autoplay music.

Think of your small business’ website like an online brochure – include relevant information that you think customers might be looking for, and resist the urge to over-write. Don’t forget to use your creativity. Consider adding unique applications not only for newsworthy business articles, but to attract customers and provide more convenience.

Your website should remain consistent with your small business’ image and reputation that your other marketing efforts produce. Once you’ve developed a visual identity for your company, design the website with your colours, logos, taglines and general design schemes in mind.

Keep your website responsive

It’s one thing to create a gorgeous website for your small business, but it’s a whole other thing to keep it working for you. Install a well-rounded analytics program such as Google Analytics, and keep an eye on what it reports. What are your customers searching for? When are they searching, and from where? How can that information be used to improve your website and your business? The beauty of websites is that they don’t have to be static. Update your site to respond to what your customers are looking for.

Do you have any tips for creating an effective small business website? Let us know!

Entrepreneurs know that hiring freelancers for their small business can be a great way to save money while still drawing upon the expertise of graphic designers, copywriters, marketers, bookkeepers and IT consultants. However, working with freelancers can be much different than working with employees. Here are some tips for successfully hiring and working with freelancers in your small business.

Don’t focus only on price when hiring a freelancer

You know that saying, “You get what you pay for”? When it comes to hiring a freelancer for your small business, it can ring very true. Sure, it could be that your freelance marketing consultant is 50% cheaper than anyone else because he only does it part-time and has a full-time job as well. However, freelancers that are willing to work for rates drastically lower than average often have to sacrifice some things in order to make those rates justifiable – they may need to work faster than usual, for example. Your end result may not be what you bargained for (no pun intended).

Trust your instincts

So you found a potential freelancer that seems great for your small business. Except for the overly-casual language he uses in his emails. Or his past work isn’t exactly the kind of thing you’re looking for. Or he takes three days to respond to your messages. Are any of these things dealbreakers for you? Unless you’re looking for a freelancer with an absurdly specific skill set, he’s not the only game in town. This is a business partnership that can mean lost time and money if it goes badly – not to mention what it could do to your mental state. Know what you’re willing to overlook and what you’re not – and stick to it.

Don’t do anything without a signed contract

Well, you can have an initial meeting or consultation, of course. But once your freelancer is hired, creating and signing a contract is the most important next step. This protects both parties and can also serve as a roadmap for the project. Include components such as deadlines, payment terms, rights and exactly what responsibilities both parties will have.

Give your freelancer clear guidelines

You need a new website, and you’ve found a freelance web designer whose portfolio looks ideal. But simply telling her, “I want a website that will stand out” won’t work. Provide clear guidelines, deadlines and goals to avoid any time-wasting confusion. Who is your audience? What are the project’s milestones? In what format will the completed product be delivered? Will the freelancer check in from time to time? Be as detailed as you can. Ensure your freelancer has all the information they need, and encourage her to ask questions.

Set realistic expectations for both parties

In your mind, you may think that three weeks is a reasonable amount of time for your social media consultant to get a buzz going about your company on Twitter, Facebook and other outlets. But is that really reasonable? Talk to your expert freelancer and find out what’s standard in the industry (and do your own independent research, too). Leave buffer zones in your project schedule in case something comes up. And don’t forget, freelancers have other clients who also have deadlines and expectations.

Deal with your freelancer directly

Or, at least, don’t give her three different people to report to. Putting your freelancer on the other end of a big game of Telephone can result in misunderstanding, missed components and the dreaded scope creep. Your freelancer should have very easy access to the person who will be giving final approval on the project to ensure goals are met correctly and quickly.

Do you have any other tips for working with freelancers in a small business? Let us know in the comments!

When we talk about operations management in a small business, we’re talking about a lot of moving parts. So what is operations management? It refers to all the activities, processes and controls a small business uses to produce its products and services. The components of operations management include:

• New product or service development
• Inventory management
• Purchasing
• Manufacturing
• Distribution
• Logistics

Whether your small business is in retail sales, manufacturing or a service company – or anything in between – you need an operations management plan. Of course, the operations plan for a hair salon won’t be quite the same as that of a small manufacturing business, but a plan is vital. How will you source your suppliers? How will your inventory get to your location? Who will control purchasing? Is it the same person who will control distribution? The list goes on! The components of operations management are interlinked, so a well-crafted operations management plan will ensure you are prepared.

Sounds complicated, but there’s a silver lining – entrepreneurs and small start-ups can design and implement new and innovative operations processes without having to overcome outdated ways of doing things. Older, larger businesses are always looking for ways to cut costs and improve operations. Small firms are fast and flexible, and can quickly gain the upper hand over the competition if they can deliver more efficiently too.

Have more questions about operations management? See what questions have already been answered in our Ask an Expert – Operations Management section. If you don’t see your question there – ask! We love talking operations management with fellow entrepreneurs.