Either situation can get you into financial and operational trouble.

• Too much warehouse space and you're burning cash on rent but not turning over inventory to pay for it.
• Too little warehouse space and you can’t meet the demand you’ve spent so much time and money driving with your marketing efforts. Also, when you outgrow your warehouse you are often riddled with inefficiencies that drive down profit.

​The chart below shows the progression of capacity and cost. When your warehouse capacity is balanced, you essentially have the right amount of inventory to sell to cover the cost of your warehouse space. The area in the green is ideal because you don’t have to spend more on your warehouse space, but have capacity for more inventory. However, as you get closer to the next level, your capacity becomes limited.

​When running and operating my own inventory based eCommerce company, I experienced having both too much and too little inventory space.

Too much space often occurred right after moving into a new facility. Moves are costly and leases often require longer terms. You don't want to outgrow a new warehouse shortly after you moved and be stuck in a lease. So, you take on a larger location with the hopes that sales support the additional warehouse space.

As my company grew, we also had to deal with having too little space. This happened when we were outgrowing some of our first facilities. I had periods where we had to move pallets out in the parking lot in the morning in order to open up enough space to work in the warehouse. At the end of the day, we moved the pallets back into the warehouse. Inefficient at best and if it was dark or raining… even worse.

How do you handle this challenge of having too little or too much warehouse space at any given time? How do you ensure that you will know well in advance when your warehouse will be too small before it’s too late? How do you know how much more space you need when the time comes to move to a large facility?

The answers lie in cubic dimensions.

There are two things that matter here:

1. The total physical size of your inventory
2. The total physical storage capacity in your warehouse

Your cubic dimensions calculations matter today and in the future.

Today it matters because:
You need to know where you stand with regard to filling up your warehouse. Are you 25% there? Are you 50% there?
Knowing will also help you see opportunities for better data-driven decisions, such as keeping fewer large items in stock or ordering fewer units more often from certain suppliers.

In the Future it matters because:
You need to know when you will outgrow your current space. This is driven by both more inventory and limited space. 
How much space you’ll need at the new location and how many years this space will be sufficient.

You need to measure your inventory and storage capacity. Once you do, you’ll have a whole new perspective on how to optimize your warehouse.

Let’s breakdown Inventory Cubic Feet and Storage Cubic Feet.

Use MEC, which stands for measure, enter, calculate.

1. Measure - each unit of inventory
2. Enter - the values into your inventory management system or a spreadsheet
3. Calculate - run the calculations to make decisions from

To get started, you need to measure each unique SKU of inventory you keep in stock. 

• Step 1 - literally measure a unit of each
• Step 2 - enter the 3 elements into a spreadsheet or if you have a system that accommodates these fields then do it there
• Step 3 - use a spreadsheet to calculate the cubic feet of each SKU using this formula:
  L x W x H in inches / 1728
• Step 4 - Multiply the SKU cubic feet x the number of units you have in stock to arrive at your total inventory dimension

"In the same way you measured your inventory, you’ll need to measure your shelving and any other storage options. (See note above regarding my FREE mini course Warehouse Capacity Planning - Inventory Businesses [Free Google Sheet]) 

Use MEC again:

1. Measure
2. Enter
3. Calculate

Enter the data into a spreadsheet.

Measure all shelving.
W x D x H in inches / 1728
Measure each type of shelf you have and the quantity of each type.

Measure all bench tops and open floor space.
Using a reasonable amount of height, stack inventory on tabletops or on the floor. Calculate these areas.

For example, to utilize open storage space you used pallets with inventory stacked 4’ high. This would amount to 48 x 48" x 48" / 1728 per each pallet location.

Steps for determining storage cubic dimensions:

1. Name each unique storage type and enter into a spreadsheet. For example, 
   6-foot shelf, gray
   8-foot shelf
   Pallet space - zone 1
   Pallet space - zone 2
   ​Tabletop - zone 1
2. Measure the dimensions of the storage types and enter into a spreadsheet
3. Sum all to find your current total storage capacity

Storage Space Variances.
There are a few factors to consider when calculating the total storage capacity.

Voids
You’ll never fully optimize your shelves because inventory comes in all different shapes and sizes. There will always be some void on the shelves

Unusable space
The shelves themselves consume some of the cubic dimensions.

Top shelf
The top shelf won’t be accounted for in the W x D x H dimension, yet may be able to consume an additional chunk of inventory. (See video​ for a detailed explanation.)

Accounting for variances
This has the potential for analysis paralysis.
I suggest using a global discount percentage to reduce the gross amount of storage capacity. 
You could spot check a few shelves to literally compare what the model has versus how much is actually there and use that rate globally.

Current State

After using MEC to determine inventory and storage cubic dimensions, you know the size of your inventory and the size of the available storage space.
inventory dimension / storage capacity = % used

Forecasting Warehouse Expansion

Now you can run forecasts surrounding expanding or modifying your inventory. Based on inventory changes, you’ll know how much additional storage capacity you’ll need.

Forecast Inventory Expansion
For existing SKUs - It’s just a matter of plugging in higher quantities for your existing inventory.
New SKUs - add new SKUs to the sheet with their dimensions and a forecasted amount that you’ll keep in stock. 

• Granular - you have the dimensions for the new product
• General - you can plug in general numbers and just look at doubling your inventory size

This inventory tool is a way to see how your inventory expands based on various scenarios.
 
Forecasting Storage Expansion

• Walk the warehouse and determine where you can fit more shelving and what type of shelving would work in each location.
• You can always store more on shelves than the floor, so always assume that ultimately you’ll have mostly shelving.
• Enter the details into a sheet and get your total capacity.

• You know where you stand in supporting your business' growth.
• You give yourself a longer runway for making huge decisions, like renting a larger facility.
• You learn a lot about your inventory and can make tactical decisions to optimize it.
• You may sleep better at night because you KNOW where you stand and what your timeframe is for having to move to a new facility.

​In summary, the MEC process is:
Measure your current inventory and storage spaces.
Enter the measurements into your inventory management system and/or a spreadsheet.
Calculate and run scenarios for scaling inventory and storage capacity up or down.
​
I offer coaching and consulting services around this topic. Schedule your FREE 30-minute consultation today.

You can watch my FREE mini course Warehouse Capacity Planning - Inventory Businesses [Free Google Sheet] for an extended explanation of the topics and steps listed in this blog. Visit the video description on my YouTube Channel to access your free tool for your warehouse capacity planning.

Bill Ross is a business coach and consultant offering small business owners, micro business owners, and eCommerce business entrepreneurs advice and support to help them achieve their goals. Learn More

​For a variety of reasons, a business owner and entrepreneur may find themselves looking for a job. Sometimes it is right after closing or selling a business, other times it is about a lifestyle change or career pivot, and occasionally it is to find something to do in between entrepreneurial ventures. 

The transition from being a business owner and entrepreneur to an employee is challenging. I know first hand because I’ve been through it. I started and ran a business for nearly 18 years and then had to face what would become one of the more challenging experiences of my life, finding a job. For me, the process took over a year, which is not too uncommon. Understanding these challenges can help you navigate this difficult road.

1. Inner Work
​
​​After being a business owner, it can be tough to know what type of job you will like doing for someone else. You may have once been the general manager keeping all of the balls in the air. Yet in companies, especially larger ones, they seek out specialists to handle narrowly defined parts of the business. Establishing how your knowledge and skills map to job roles in the market is difficult to do and requires a lot of inner work.

Inner work refers to introspection surrounding three keys areas:

• How are you naturally wired?
• What are you good at?
• What do you love doing?

The place where these three circles intersect is where you should ideally focus your career. There are several ways to arrive at the details to populate these circles. To answer the naturally wired question, take some personality assessments and for the what are you good at or love doing parts, make lists and talk to family and friends. It’s critical to put your time into inner work because if you don’t, you could end up being unsatisfied with your job.

2. Limited Jobs Available

If you operated your business for any length of time, chances are you had a significant amount of responsibility and made good money. To work for someone else with a similar amount of responsibility and compensation, you are looking at higher-level positions in the company, such as Senior Manager, Director, VP, or C-level. There are fewer of these jobs at the higher level. Consider the pyramid in the image below. There are more entry-level lower paying jobs at the bottom and fewer executive high paying jobs at the top.​

You can see that there are fewer seats near the top where you want to be. Further, these roles are highly scrutinized and competitive. Another challenge is that you are not an “insider” who has been climbing the ladder at similar businesses for years. Instead, you’re an “outsider” who ran your own business. To a hiring manager, you’ll appear to be more of a risk as compared to a candidate who currently has the same job title at a competing business.

3. Rusty Job Search Skills

As a business owner, you didn't need to look for a job. The last time you were in the job market things may have been different. There are a ton of new things to know and skills to master when it comes to a job search. If you haven’t had to face it lately, you’ll be on a steep learning curve. 

Some key areas of a job search include:

• Resume, Cover Letter, LinkedIn Profile - Did you keep this information current and updated while you were running your own business? Or is the content no longer relevant to the job you are looking at? These assets need to be on point and specifically oriented to the job you are trying to land.
• Job Search Activity. Are you unclear about what actions to be taking or what combination of tactics to employ? How much networking should you do and what are you asking for exactly? Which jobs should you apply for and how many per week is the right amount? How do you balance all of these activity options and know when to make modifications?
• Interviewing - While you probably have interviewed many people to work for you, when was the last time you were being interviewed? Not only are your interviewing skills rusty, but now you have to convince the interviewer that you will be a good employee and not a lone wolf entrepreneur anymore.​

4. Credentials, Skills, and Knowledge

The things you had to be good at to run your business won’t necessarily apply to the type of job you’re looking for. Experience with a particular software tool is a classic example of this. Your business may have had a CRM tool but it wasn't Salesforce. You understand CRMs, yet deep experience with Salesforce may be a requirement for the type of role you’re seeking and thus you’re stuck. This can apply to certifications like Lean Six Sigma, Project Management Professional, Google Ads, etc. These are things you may have dealt with at your company, but it never made sense to get a certification in any of them. With such fierce competition for higher-level roles, if you can’t check off a certain box for a particular skill or knowledge, you’re much less likely to move toward an interview.

5.  Entrepreneurs Are Misunderstood

Entrepreneurs make up a very small percentage of the world and thus most recruiters and hiring managers have little context for who they are and what value they can bring to the organization. Hiring managers want to hire people that look just like them and their teams who have been in that type of business all along. Entrepreneurs, because they’re so rare, don’t fit that profile. Therefore, hiring managers can’t wrap their heads around their value. 

Classic points of misperceptions include:

• They’ll quit and take our secrets to start another business.
• They can’t work for a boss.
• They’re a loose cannon and won’t follow procedure.
• They must be rich, why do they want this job?

​​
To break through these challenges you need to work hard on positioning yourself correctly for the role and actively work on downplaying the entrepreneur image and play up your value to their business.

After struggling through all of these challenges myself, I was inspired to create a course just for entrepreneurs transitioning to an employee. Created by someone who has been through the trenches (me!), this course outlines the entire process to help cut down the amount of time it takes to find a new career after being a former business owner.

If you want to learn more about this course, you can get a FREE preview here: oppositeofwork.thinkific.com.

​Entrepreneurs follow many paths in their lives and sometimes that may include working for someone else.

​eCommerce business owners often have a hard time parting with inventory. That sounds counterintuitive to running a thriving business. Let me clarify, some eCommerce business owners have a hard time parting with inventory that’s not moving. Whether it's a misguided strategy or an emotional attachment to having spent money on it in the first place, you may be holding onto your slow turning inventory too long.

Inventory is meant to turn over, making a profit as it turns. It’s vital to manage your inventory levels well because it’s cash that you can’t access. If you allow your stock to accumulate, you’re tying up your cash. That could become a big problem in a hurry. When discussing my inventory philosophy with my clients, I often ask them to visualize the products sitting on their shelves as piles of money.

​Whether or not you break even or make a profit on those slow moving items, that inventory can become cash in your hand. So, don’t be afraid to cut your losses and reinvest in something better.

There are many reasons you end up with too much of a particular product. Regardless of how it happened, you can generally group the reasons into two categories: internal (your fault) and external (not your fault). 

INTERNAL FACTORS

Your forecast was wrong - you thought that market demand would be stronger than it turned out to be.

Your supplier has high minimums - in order to buy any, you needed to buy a lot.

You have an emotional attachment - maybe you believe that it’s a strategic product that you need to sell in order to sell other products. Or it could be a newer item that you were sure would be a hit. Or maybe you don’t want to settle for break even or lower profit on a particular product, so you let it sit there not moving, hoping that one day someone will buy the items at their regular prices.

You're not paying close attention - and you’re not actively monitoring your inventory levels down to the product level.

​You have mechanical issues - like the product page is experiencing errors, the page details (description, images, title, specs, etc.) are not optimized, or maybe your marketing campaigns are not working properly.

EXTERNAL FACTORS

Competition changed - your competitor(s) have a lower price point, better marketing, more sales channels or combinations of all of these.

Consumer behavior - your customers are not as interested based on any number of factors like newer/better/cheaper versions, changes in attitude, trends, etc.

​This really depends. For most smaller eCommerce businesses, simply looking at the average monthly units sold over the past several months divided by the quantity in stock will show you how many months you currently have to sell. In general, this is a decent metric to follow.

For example, if you have been selling an average of 100 units of a particular product per month for the past year and you currently have 600 in stock, you have roughly 6 months worth of stock on the shelf. 

Around  2-4 months worth of stock is a very general rule of thumb for how much inventory to keep in stock. However, it does vary widely and there are some things to take into consideration. 

INVENTORY LEVEL CONSIDERATIONS

When you may want to hold high inventory levels for a product:

Toilet Paper Products - products you never want to run out of (like TP). Reliable and consistent products that your customers depend on you for. Since you have a long track record with these, you can more confidently buy higher quantities. The reason you’d buy more is to ensure you never run out of stock and lose sale opportunities and customer goodwill. You can also get lower prices from your suppliers with volume discounts.

Unreliable Suppliers - which you don’t want, but nonetheless will have from time to time for a product you need to sell. If your suppliers constantly run out of stock, have shipping/invoicing errors, change prices often etc., it may be better to order more at a time and carry higher quantities so you won't have to deal with that supplier and their issues as often.

Opportunity based - this may include a supplier close out where you get a low price for buying a lot. Or it could be a product that if you buy a lot, you get a lower cost and then can put it on sale in the hopes of running through a lot of units in a short window.

Seasonal - of course you want to scale up your operations when it comes to your biggest selling season and be sure you have the right amount of inventory to meet customer demand.

When it may be okay to hold just enough inventory for a product:

Reliable suppliers - you can keep less on your shelf because you know a replenishment order will happen quickly if your suppliers always have stock, are geographically close to you, and are easy to do business with.
​ 
Unproven products - new products in particular should be bought in lower quantities until they’re proven in the market.

IMMEDIATE ACTIONS YOU CAN TAKE TO REDUCE SURPLUS INVENTORY OF A PARTICULAR ITEM

Sell it - drop the regular price or put it on sale and promote it through all of your marketing channels. If the product is discontinued and you’re never going to buy it again, make the sale price very aggressive at or below cost. Remember it’s all about turning the inventory into cash.

Return it to the supplier - see if your supplier is open to taking back some of it. You’ll have to pay for return shipping and maybe a restocking fee. Or they may have another item you can exchange it for. Note, depending on your supplier, they may not be happy about this move. But, it is an approach you can try in a pinch.

Donate it - only if you have no other way to move through it at all. Donate it and talk to your accountant about taking the tax write-off.

LONG TERM APPROACH TO CONTROLLING INVENTORY LEVELS

Forecasting - get better at inventory forecasting, your eCommerce will live or die by it. If you don’t have anyone who is great with data analytics, try to find someone who can help you. 

Suppliers - work toward partnering with reliable and consistent suppliers.

Analysis - make it a habit to consistently monitor your inventory levels down to the SKU level.

As you scale your small or micro eCommerce business, strive to continually build sophistication, discipline, and processes around how you manage inventory. And if you find yourself holding onto extra stock for emotional reasons, it is probably time to break up with your inventory.

So here we are. Unprecedented. Your small business is facing a challenge you could never have imagined and this change happened in the blink of an eye. You don’t know what will happen in the future. Will your business have a place in the “new normal”? Can you even say? The new normal is constantly evolving. But, so can you.

If you can get your business back on track, continue working on reopening and planning for full capacity. On the other hand, if you are unclear about what the future holds for your business, now is the time to do some inner work. 

If you think your business may no longer be viable in its current form, learning about yourself will help steer the new direction you should take your business.

Who Am I?
​
How are you naturally wired? To find out, take a few personality assessments to learn about yourself. You are much more likely to be happy and successful if you do work that fits your natural personality type. There is a wide range of assessments available. Some may require a fee or a trained professional to administer the test. Start with a free or inexpensive version to get a general idea of what your natural inclinations are. 

Consider the following personality assessments:​

Myers Briggs 
CliftonStrengths
DISC (Truity) 
Kolbe A 

Logos are registered trademarks of the respective companies. Bill Ross and Opposite of Work are not affiliated with any of these organizations and makes no representation or claims of any kind to these third party ​companies or their assessments.

What Am I Good At?

Make a list of the things you know you are good at. Think of things that have always come easy to you in comparison to others. For example, did you always pull straight A’s in a given topic in school? Are you the one in your peer group who always organizes the events and gets people together? Are you talented at drawing or painting? Make a list of all the things you are good at, regardless of how you became good at it (whether through training or natural ability).

What Do I Love Doing?

Make a list of the things you love doing. This can be both personally and professionally. Think of times when you are in the zone, where time flies by and your mind is clear while you are engaged in the activity. Examples may include running data analysis, leading a presentation, coaching little league, gardening, or running.
​
Look for the items and characteristics that appear in all three categories.

The common area is where you will have the best chance of being happy and satisfied in your work. Which can lead to being more successful because you’re motivated and passionate about what you are doing.

If you need to pivot your business model, modify your strategy, or completely change the way you generate revenue, you should start with the inner work to find out what you want to be doing moving forward. Then you can focus on the how.

KEY PERFORMANCE INDICATORS 
​​​A lot of businesses focus on Key Performance Indicators, KPIs. The main areas that you and your team determine to be the most critical to the success of your business.
​
Typically, you establish a quarterly goal for the company. Next, you establish goals in certain functional areas that support the overall goals. If the company’s goal is to increase gross margin by 5%, the goals of the functional areas are designed to have a positive impact on gross margin. 

​Example of Functional Areas Supporting Overall Company Goal.
In this example, the company’s goal is to increase its gross margin by 5%.

• The supply chain team works on reducing the product and inbound shipping costs.
• The marketing team increases the selling price.
• The finance team works on reducing credit card processing fees.
• And so on throughout the operation. 

Your KPIs are set at the company level and they trickle down to the various operational areas. 

Tracking and Posting Results for Various Metrics.
​You track and post results weekly for the established KPIs to show how the metric is moving. You use this to determine the effectiveness of your teams ability to affect the desired change. How are you tracking towards reaching your goal of a 5% increase in gross margin?

Why the Needle Isn’t Moving.
Week after week you focus on tracking the key performance indicators. But, the needle isn’t moving. Here’s why:

The focus has been on establishing what you want to improve and what areas you need to focus on to make the improvement, but not on the actual detailed work required to make it all happen.

The KPI itself, like in the gross margin example, is a rearview mirror. You and your team run around taking actions hoping that the metric moves towards your goal. All of the time is spent taking various actions and then tracking the metric. 

However, success lies in tracking the specific inputs of activity that you believe will most materially impact the KPI.

Don’t only track the KPI. Rather, the objective should be to track the Key Performance Indicator (ie. gross margin growth by 5%), AND the specific inputs you need to work on to achieve your goals. I call these the KPIs, Key Performance Inputs.

KEY PERFORMANCE INPUTS

You’ve established your KPI of a 5% increase in gross margin. Now you need to establish and track your key inputs. And that is hard work. While you likely have a good idea of where the work needs to be done, you will really need to dig deeply into the activities and timelines required to accomplish what you set out to do.

Once defined, the key inputs will translate into projects that are tightly defined and managed.

Example of How KPIs Drive KPIs.
In this example, the KPI (Indicator) is:
Grow the email marketing channel revenue by 10% in the first quarter.

The KPIs (Inputs) are:

Add 20% more email addresses to the database

• Purchase 2-3 lists
• Add a discount coupon with sign up

Test Offers - use AB tests and lock in an ongoing strategy

• Buy one get one free
• % or $ off offers
• Free shipping

Customer Retention

• Unsubscribe rates
• Repeat order rates

Within the bullets above, each specific sub-bullet point requires its own project plan with dates, milestones, collaborators, and so on. There are seven inputs grouped into three categories. You may come up with even more actions you can take in addition to the above. Yet, it’s important not to take on too many activities simultaneously. Because the more you take on, the more thinly spread you are, and the higher the likelihood of not meeting each specific project goal.

You don’t want to simply add a bunch of actions to a list that you think could increase the email marketing channel revenue by 10%. Then, at the end of the quarter, you look back and ask how did we do? Did we get to all of our ideas? Did we increase the channel?

Instead, have the vision and discipline of picking the top 5-10 key inputs and THAT’s ALL. Then you can track your progress and the results of these key inputs as you go to see if you are moving the needle.

You can always focus on different inputs during the next quarter. But, you need to control the scope so you can truly affect things.

Tracking KPIs (Inputs).
Each week at your KPI (Inputs) meeting, you should spend a moment looking at the top-level KPI (Indicator), which is growing email revenue by 10% in this example. However, the bulk of your time spent at the meeting should surround the details of each specific project (the sub-bullet points) and their status. Such meetings often turn into troubleshooting sessions. The project plans may be fluid, but you should be unwavering in the results you are after.

Let’s say you spoke with a list broker who could not deliver the type of email list you need to buy. You will need to reach out to more brokers. You will need to determine quickly if it’s even possible to obtain the type of list you need. If not, you need to stop that project (using a list broker to get new emails) and redirect your energy towards the other ongoing key inputs.

Seeing Results from KPIs (Inputs) is Very Satisfying.
Results from these mini projects are invigorating and motivating. The details of the key input projects are clearly defined and actionable. Which leads to more satisfaction and better results as compared to a more vague direction. Imagine starting your day knowing exactly what work you need to do and having the opportunity to brainstorm any barriers with the team. As opposed to going into work every day with the generic “get better at email” directive.

Tracking KPIs (Inputs) Is the Discipline Required.
You can spend all your time defining your goals, deciding where you want to be, and using fancy business lingo. But, at the end of the day, the devil is in the details. You need to break it down to the actions required on a weekly or sometimes daily basis and consistently check in on your progress. You’ll find your teams will build strength in overcoming barriers and that’s really what results are all about. Having the discipline to track and focus on the actionable items will help you reach your company-wide KPIs (Indicators).

John F. Kennedy once said “a rising tide lifts all boats.” He was referring to the idea that a strong economy will benefit all participants. This is especially true when it comes to small businesses. 

We can easily see that when the economy is strong and consumer confidence is high, businesses have an easier time succeeding. During a strong economy, entrepreneurs start businesses and invest in growth. It is common to take risks (a synonym for investing in this context of building a business). You invest in growing your business by basing your decisions on recent historical trends and your best estimation of future trends. Facts are facts and nothing beats using recent history as the primary input for forecasting revenue growth and determining where to invest.

During strong economic growth, businesses are oriented toward keeping that upward trajectory going by investing in people, systems, infrastructure, innovation, etc. Many business owners borrow money to do this. They give up equity in the business or take on debt to cover the investments required to sustain the recent growth rate. During the growth phase, it is easy to become less disciplined when the business is moving along.

Areas often under scrutinized or deprioritized when the business is doing well include:

• Inventory turn rates
• Employee productivity
• Automation
• System scale
• Security
• Marketing ROI

​When revenue is increasing month over month, you might overlook a small dip in profitability. Maybe you're thinking it's not a big deal. After all, you're still making great money and things are cruising along.

Then something like a global pandemic hits and the tide rolls out... quickly. 

What do you see during a severe low tide at the beach? You might see mud, rocks, seaweed, shipwrecks, and all sorts of debris. The type of things you wouldn't normally see when the tide is high and water is covering it all up. Sometimes the stuff you see left on the beach isn't that pretty. During low economic tides, businesses become exposed like they may not have been previously. The not so pretty reality of ineffective employees, poor systems, lack of discipline, etc. gets exposed. Some business owners, along with their customers and investors, see the ugly side of the business for the first time. 

Of course, COVID-19 is more like a tsunami than your standard low tide. Even the most efficient businesses are getting stuck in the mud. Regardless, all businesses struggling with this pandemic are faced with the inefficiencies that exist and are no longer getting covered up by the high tide.

For the fortunate businesses that are able to survive the pandemic, now is the time to look at what part of your business washed up on the beach and was exposed during the low tide.

Headcount. Is each employee bringing the most value to the company? Are they the best fit for the position? Can you do more with less?

Inventory. Do you have too much inventory? If so, can you return it to the supplier? Put it on sale? Anything you can do to turn it into cash? Moving forward, how can you improve forecasting?

Marketing. Did you underinvest in marketing? Did you spend too much on marketing, never quantifying the results? Can you make smarter marketing spend decisions using data and analysis?

Sustainability. Were you more focused on revenue growth than profit margin and overall sustainability? Can you pivot and create new opportunities?

Safety Net. What are you going to do differently to build a safety net for your business? Just like emergency preparedness for wildfires, earthquakes, and other natural disasters, what plans can you make for securing your business?
​
Once your business is stabilized and will remain afloat, focus on how you can restructure your business to be more efficient and ultimately, weatherproof. One thing is for certain, the high tide will return. And when it does, use the growth to build a stronger foundation that can withstand future storms.

​​​Bill Ross is a business coach and consultant offering small business owners and entrepreneurs advice and support to help them achieve their goals. Learn More

​During unprecedented times, small business owners need to rethink how they approach their business and look at their operations in a new way. 

I enjoy watching reality shows about surviving in the wild. My all-time favorite is Alone, where contestants are dropped into a remote location by themselves. They try to survive as long as possible by living off the land and the last person standing wins $500,000. What helps a contestant become the winner? Keeping the fire going, along with having the mental fortitude, is the key to long term survival. 

If you can’t start a fire and keep it going in a moist environment with wet wood, you’re out of the game. Fire is required to cook food, to sanitize water, for warmth, and protection. You don’t always have a roaring fire, sometimes it dies down. But, if the embers are still glowing red, you can add more wood to the pile, even if it is slightly wet, and the fire will come back. 

What can you do during the economic hardships posed by COVID-19 and during other challenging times? You need to keep the embers burning in the harshest of conditions. Even if the embers flicker and get down to the lowest amount of heat, don’t let them go out. It will be much harder to start a new fire than to stoke the embers and reignite the flames.

Let's apply this analogy to your business. The embers represent the minimum scale of operation you need to set up to keep your business going. Forget about how high the flames were before when your business was cooking. Now more than ever, you need to maintain a few hot embers by adding small pieces of wood to the pile sparingly. Keep your business going using the lowest amount of resources possible.

A bare minimum business model is the concept of operating your company using the least amount of resources required and determining the minimum amount of revenue needed to keep the business going. The bare minimum business model will look different for your particular operation. At a high level, you need to align your supply and demand (cut costs to keep in alignment with lower revenues) and use your cash sparingly.

Demand
Your demand is down, way down. And it is not clear how long it will stay that way. A terrifying situation for sure. Still, you have to do your best to forecast what your sales will be moving forward. Make best-case, medium-case, and worst-case forecasts then plan for the worst-case. Do you remember what it was like when you first started your company and it was just you running the show with little to no help? Can you get back to your roots? The key here is to separate emotion from the process. The situation is what it is and you are in survival mode now. Be draconian in your decisions and move quickly.

• Marketing
  Although marketing may be helpful right now, remember the world is frozen. Marketing may not have the same impact right now as it did before. You can no longer rely on the same metrics you used in the past to determine marketing spend. Focus on one to three top marketing activities and keep a close eye on your spending and monitor the results carefully.

 

• Customers
  Your best customers may be the ones to help get you through this. Leverage your email and/or text list and stay in front of them. Simply let them know you’re still open and that you need their support. They may be able to provide you with just enough business to keep the embers glowing. 

Supply
If you are an inventory-based business, work on procuring or producing just enough inventory to satisfy your demand forecast. Try to get supplies just in time. Don’t trade your precious cash for excess inventory right now. Secure only what you need only when you need it. In a service-based business, assess who on your team has the expertise to serve your clients and how many total hours it will require based on your best-case, medium-case, and worst-case demand forecasts.

Cash
It goes without saying, but avoid spending your cash. Reach out to all of your accounts payables and ask them what their plan is for responding to this crisis. Set the stage for delayed and reduced payments, but with a desire to continue doing business with them, now and into the future. Vendors should be understanding and will appreciate you starting the conversation.

Once the market starts to show signs of recovery, add very small pieces of wood to your glowing embers. This means as demand creeps back up, invest in your business conservatively and gradually. 

Keeping the embers burning is the key. Forget how big your fire was a few months or even weeks ago. Forget how big you want to make your fire down the road. Simply do the work that will allow you to keep the embers glowing all day, every day.

Good luck, have faith that you will get through these challenges, and remember ​tough times don't last, tough people do.

​We see motivational Instagram posts designed to keep us inspired. Do they help? Sometimes. Do they make us roll our eyes? Sometimes. Do we love them or hate them? Sometimes.

Overall, I like motivational posts and quotes. I appreciate positive affirmations that give me a little mood boost. As long as they aren’t preachy or trying to lecture me. Nothing irks me more than the Internet telling me how to live my life. 

​Encouraging quotes and sayings pop up all over, but what do they even mean anyway? It depends. They mean something different to everyone. If you catch one that resonates with you at the right moment, it gives you that push you need to stay in the game. Or they make you feel like you're not alone out there. Quotes and sayings may even remind you of why you started your small business in the first place. And they help you stay motivated, especially when times are difficult.

When I was running my eCommerce company, I always had the following quote from Calvin Coolidge taped to the wall above my desk. 

People may feel insecure when comparing themselves to others. I remind myself that I work hard and remain focused on my goals. I am persistent and actively work on things that improve my skills (such as an advanced course on Google Sheets) or activities that help move the business forward (for example, an online ad on Facebook). Some actions are directly related to a plan, others are ancillary. The key is being persistent, staying active, and always doing something. I call this ROA or Return on Activity.
​ 
So, to me that inspirational post Just Keep Going means staying active, being persistent, and having faith in that ROA.

​Bill Ross is a business coach and consultant offering small business owners and entrepreneurs advice and support to help them achieve their goals. Learn More

In Jim Collins' classic book, Great by Choice, he describes the concept of firing bullets, then cannonballs. To paraphrase, you fire bullets first. Bullets are things that are low cost, low risk, and don’t distract you from your business. Once you have some data to support your next course of action, you fire a cannonball. In this context, a cannonball involves putting all your resources towards your tested plan. (Read more about Fire Bullets, Then Cannonballs by Jim Collins.)

In other words, when it comes to your small business, you don’t necessarily want to jump into everything with both feet. Oftentimes, it’s prudent to test the water before taking the plunge. As you may have noticed, I’m a fan of analogies and have always been intrigued by Jim Collins’ concept.

SAAS Tools (Software As A Service)
Free versions first - always use the free version before committing to a paid plan.

• Max out the features and functions of the free version.
• Determine when you need the features of a paid plan.
• Run an analysis of how much time you’ll save. Are the time savings worth the cost? If not, keep grinding with the free version for a while longer.

Digital Marketing
Small budgets - spend a little and get some impressions and click-throughs.

• Do a lot of testing across ad copy, bids, demographics, etc. 
• Slowly increase the budget on successful campaigns over time. It may be tempting to quickly add more budget to drive impressions, but it’s best to test first before increasing the budget to make sure you're reaching the right market.
• The small modifications you make along the way will help future ad spend be more productive. 

Real Estate
Get uncomfortable - real estate is a huge fixed cost and carries a lot of risk. Stay in your current office as long as possible.

• When you reach a point of being uncomfortable and inefficient in your office, double down and brainstorm ways to stay there even longer. 
• Rearrange your workspace or maybe share space with another local business.
• Store inventory in your neighbor’s garage for a small fee. (We kept inventory boxes in the bathtub of our San Francisco flat when starting out.)
• Avoid signing a lease or upgrading your current lease until you’re fairly certain of the upside in terms of profit growth.

Hiring
Avoid employees - sounds crazy and I’m not saying avoid hiring all together. Just get as far as you can without a permanent employee.

• Some entrepreneurs see employee headcount as a symbol of their company’s growth. But, make sure each employee is adding value to the business and truly freeing you up to do what you do best.
• Like real estate, employees represent risk and big fixed costs. Before hiring full time staff, use freelancers, contractors, and part time workers to help you learn how they will add what you need to your operation. (The laws surrounding employees vary by state. Be sure to consult with a Human Resources Specialist and/or Labor and Employment Law Attorney to ensure you are not violating any laws.)
• When you do hire an employee, understand their role and how they will improve the bottom line.

Vendors
No contracts - work with vendors and suppliers who do not require you to enter into a contract whenever possible.

• A great vendor doesn’t need to force a customer into a contract because they deliver results consistently.
• If you fall in love with a vendor and they’ll offer significant discounts or other advantages with a contract, then pull the trigger and fire the cannonball.
• When you can, include a performance-based out clause in the contract so they’re incented to continue delivering results.

Inventory
Start small - buy the smallest increments you can when launching a new product. 

• Do this even if the cost per unit makes the gross profit less than desirable.
• It’s more important to ensure your market likes the product, that you have solid, defendable marketing channels in place, and that you can back up the fulfillment and customer service.
• If the item is a hit, increase the quantities in exchange for a lower cost per unit from your supplier.

Equipment
Have an out - once you pay for a piece of equipment, it may take a while to recoup the investment.

• If things change in the market, you’ll be stuck with equipment that doesn’t generate the revenue you forecasted and will be out the cash it took to buy it.
• Look for ways to try before you buy the equipment so you can fully understand the value it will bring to your business.
• Consider smaller or less sophisticated equipment that you could sell later once you have evidence that a bigger model would yield even better results.

For entrepreneurs who aren’t backed by millions of VC dollars, it’s critical to avoid costly mistakes. One way to do this is by testing the waters before investing resources. Firing bullets, then cannonballs is an important skill to develop as a small business owner that can help you mitigate the risk surrounding major financial business decisions.

Entrepreneurs know how to get into business, but many aren’t sure how to get out of a business. Or more importantly, they aren’t sure when they should exit their business. 

The signs may be right in front of you. Here are some things to consider. Do any of these exit signs resonate with you? If a lot of them are present, it may be time to reevaluate your exit strategy. (You do have one, right?)

INTERNAL SIGNS
Internal signals involve things that are happening inside your company and are largely within your control.

Financials

• Profit ​You are not turning a profit and don’t have a clear path and timeline to start.​
• Cash You are running out of cash and can’t get more quickly.
• Unit Economics Your unit level economics are negative, meaning you can’t turn a profit on a single unit of what you’re selling.
• Shrinking Your revenue and/or profit is gradually shrinking over time.
• Death Spiral You are in a death spiral of cutting costs leading to reduced sales, customer retention, efficiencies, or employee morale
• Bad Events Events like a lawsuit, equipment replacement or technology upgrades that require a ton of cash but don’t result in any upside like revenue growth or efficiency gains.

Burn Out

• Stress You have constant stress, anxiety and/or depression.
• Hours You have been working long hours over consecutive days for a long duration. Or you may be spending far too few hours at work and it’s hurting the business.
• Bad Behaviors You are gaining weight, abusing substances, gambling or doing any number of negative things.
• Low Energy You are having trouble getting out of bed or working a full day. You feel down and uninspired. Your employees, customers, and vendors are starting to follow your lead.
• ​Trapped You don’t see a way out, you feel trapped and wish you could hit the hyperspace button and land somewhere totally different without the business holding you down.

Unfulfilled

• Bored The work is repetitive and not stimulating. It’s just boring and you’re watching the clock wanting to go home to do more enjoyable things.
• Skill Deterioration You are not learning any new skills that interest you or have a high market value.
• Knowledge Deterioration You are not acquiring any new knowledge that is of interest to you or that has a high market value.
• Regrets You often wonder if you’ll regret staying in the business versus trying something new.

Situational

• Health You are having health issues that require a long time to work through and/or have uncertain consequences.
• Family You have family related issues that will take your time and focus away from the business.
• Spiritual You have a fundamental change in your life view and the business is not in alignment.
• Succession Plan You don’t have one. If suddenly you couldn’t work, the business would be in serious trouble.

EXTERNAL SIGNS
External signals involve things that are happening outside your company and are largely outside of your control.

Market Changes

• Demand Is shrinking for your offering and there’s no viable pivot you can make to increase sales.
• Disintermediation You are a middle man and the industry has changed to remove you from the equation.
• Technology The required investment in technology to stay competitive is becoming too great for your business. 
• Consolidation The industry you play in is moving toward 2-3 major players who have either acquired or forced smaller players out of business.
• Labor The cost to pay your employees is growing because you happen to be somewhere with many high paying jobs and a strong growing economy with a competitive job market.
• Real Estate Like labor costs, your lease is getting more expensive due to supply and demand in your area.
• Ecosystem Your suppliers or vendors had a disruption that affected you resulting in like higher costs.  Other items include product/service quality degradation, management changes, government changes (tariffs, taxes, regulation) and disintermediation.

Competition 

• Many If the barriers to entry are low, expect lots of competitors to enter your market and erode your share.
• One A big company with a lot of cash decides to enter your market.  
• International You are seeing more products or services coming from countries where labor is cheaper and your customers are ok using overseas companies.

External Environment

• Legal New laws making it more expensive or maybe impossible to run profitably or stay compliant.
• Labor You can’t find good people in your area and you can’t outsource the work.
• Government Your state or local government changes something that harms your business.
• Natural A disaster has made it impossible to continue operations and recovering isn’t viable when you analyze what it would take to rebuild.

Consider this list a starting point for determining whether or not you need to look into shutting down your business. Did you answer yes to just a few? Are the feelings or situations temporary? Is there a pattern that keeps repeating itself? Saying yes to a lot of these exit signs could mean it’s time to exit your business.  Saying no to most of these could mean you just need to make some adjustments to get things on track again. Understanding the lifespan of your business is key to knowing when it’s time to sell, close or transfer your company.

Starting a business is hard work and challenging. Exiting your business is hard as well. You were driven to become an entrepreneur, acquiring the skills to exit your business will free you up to do the next big thing in your life.