6 Keys to a Successful Business

Millions of people dream about starting their own business, but only a few go further than their thoughts. Many people are unsure of the keys to a successful business, especially when today’s business world is full of unknowns, twists, and turns. 

While there are always procedures you need to follow in your business and industry, there are also certain keys to a successful business that apply to any venture. Check this article to find out what they are! 

Key #1. Know your competitors

No matter what type of business you’re starting or running, you’ll have competitors. Even if there’s no other business offering exactly what you plan to sell, there are likely to be other products or services your target customers use to satisfy their needs. Moreover, other businesses may be doing something right that you can implement in your business to make more money.

To succeed, you need to research the competition and find out as much as possible about what they sell and how they sell it. Competitive research is something you should plan on doing on an ongoing basis, too. 

If you’re running a coffee shop, you can visit your competition’s cafes, ask other customers what they think, and gain helpful information. However, if you’re running a business with much more limited access to your competitors, such as a chemicals company, you can take a different approach to research your competitors. For example, you can consult with a business professional and accountant to go over their financial information, not just what the business presents to the world. 

Key #2. Do market research

Market research is one of the main keys to a successful business. Entrepreneurs should never throw their caution to the wind and start businesses based solely on personal opinion. Business success depends on many factors, with data being one of the most fundamental. And data comes from research. What is the size of the possible customer base, and what are their characteristics? It is important to understand what drives and motivates the buyer personas to target them efficiently.

Key #3. Have a detailed plan

An accurate and precise business plan can help you focus on your goals. You’ll refine your business idea as you create your business plan, and you’ll have a roadmap to refer to before making major decisions. What do you expect from your business? How long will you take to achieve your goals? What is your monthly or quarterly target? 

So, whatever your goals are, write them down and put them somewhere where you will see them every day. Then take each goal and break it down into smaller steps. You can set a certain time to review your plan and mark what you have completed. Having a clear direction will bring you closer to your goals. 

Key #4. Provide great products or services at a reasonable price

In today’s hyper-competitive business environment, your business’s products or services need to be good enough to meet or surpass the clients’ expectations once the customers are there. This is how you turn your customers into brand ambassadors, which is one of the best and most cost-effective ways to get a small business on the map.

The first principle to consider in establishing any new product or service is to determine if it meets an actual, existing need that customers have right now. No product or service can succeed unless it’s somehow unique and superior to its competitors’ products or services. A new product or service must solve a consumer problem or improve the client’s life or job in a cost-effective way.

The safest strategy here is to start with a common product that already has a widespread market and then figure out how to improve it (e.g., provide faster delivery, produce higher quality, or lower the price of the product or service.) It’s a good idea to start with a product or service that people are already using and find some way to make it more desirable, instead of trying to invent a whole new thing. 

The second principle for any business success is offering good quality products or services at a fair price. Your business must have a unique selling point (USP) if it competes with other products or services. It is one or more features or benefits that make your products or services unique, different, and superior to any competitors.

Key #5. Keep your records organized

All successful businesses keep detailed records. Proper bookkeeping helps you know the business’s financial status and what could potentially become a problem moving forward. Knowing this helps you visualize future projections, create strategies to overcome those challenges, and assist in business planning. 

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Most businesses are choosing to store their records physically and digitally. By constantly backing up digital information, especially when it comes to financial data, a business owner no longer has to worry about losing their data. If you choose to keep physical records to ensure that the digital information is correct, keep specific folders for each aspect of the business appropriately labeled and organized so you and anyone in the company can access them easily. 

Key #6. Be consistent

Consistency is a key component of a successful business. Being consistent means understanding that your business will not likely make money immediately, but you still stick with your goals and never give up. Consistency creates long-term positive habits and produces the results you were hoping for so that your business will eventually make some money. 

The bottom line

Once you know the main keys to a successful business, you’ll have a strong foundation to grow your business. 

In summary, to succeed in the business world today, you need to be flexible and have good planning and organizational skills. Being a business owner means being in a state of constant learning and adapting.

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About Shoeboxed

Shoeboxed is a receipt management application that turns your receipts and business documents into a digital format in just one click by taking a picture straight from your smartphone or scanning a pdf. It automatically extracts, categorizes, and human-verifies important data from your receipts so that you can go over and check your records anytime with ease. Shoeboxed ensures you will always have your receipts securely stored and ready for tax purposes.

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What Is the Key Difference Between Cost and Price?

If you’re new to running a business, it’s important to understand the key difference between cost and price. While these terms are frequently used interchangeably, they have very different meanings in financial statements. Misunderstanding or using these terms can lead to making accounting errors or wrong business decisions. 

In this article, we will bring you an overview of the key difference between cost and price and the factors that affect each, with a bonus of the most typical examples of cost and price. 

The key difference between cost and prices

In its most basic form, cost refers to the total expenses incurred to create a product or service, while price refers to the total amount a customer is willing to pay for a service or product.

Profit is the first difference between the costs incurred and the price paid. The price of any service or product is usually more than its cost because it includes the profitability and the cost of producing the item. 

The second difference between cost and price is that the cost of a product can influence its price. For example, if there is an increase in labor costs, businesses need to increase the price to earn profit. 

Market factors can affect both the cost and the price of every product. The difference here is that: While price fluctuations usually occur outside the business context, and you can do nothing about it, a business can lower the product price, which stays under its control, to minimize this effect. 

What are the factors that affect the price?

Two fundamental factors that significantly impact price are supply and demand.

Supply

Supply refers to the number of goods or services that the industry can deliver. It includes both visible and invisible products and services, such as cars, data entry, marketing, etc. Several times, the quantity is limited. This implies that only a limited amount of items and services are available at any given moment.

Demand

Demand refers to the market’s need for an item, whether tangible or intangible. Like supply, the number of consumers is limited. Demand may fluctuate depending on several factors, including affordability, the worth of an item, and the need for such products.

What are the factors that affect the cost?

The cost of a product is determined by two main factors: risk and inflation.

Risk

The cost of a product is directly impacted by risk. If the capital required to create an item is high-risk, the price will almost certainly be higher.

Inflation

Product prices are also affected by inflation. In most circumstances, financial institutions engage to maximize employees’ wages.

Furthermore, the supply of raw materials and other manufacturing necessities directly impacts the cost of an item. Products with scarce essential ingredients may have higher prices. Similarly, items with effortlessly natural ingredients have lower production costs.

Examples of cost and price

Here is a typical example of the difference between cost and price: If a T-shirt costs $20 to produce, its price must be higher than $20. Otherwise, the business cannot earn a profit on its sale. 

So, before determining the appropriate price for the T-shirt, the business first had to determine the cost of producing the T-shirt. This cost includes material expenses, labor expenses, location expenses, delivery expenses, etc. 

Another common example of cost and price is that costs are subtracted from prices to arrive at a business’s profit, either for individual products or in aggregate for the entire business. For example, if a company generates $1,000 of sales from its product prices and incurs $800 in costs, its profit is $200.

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The bottom line 

Though similar in everyday language, cost and price are related but different terms. It’s crucial to clarify the difference between cost and price, especially when it comes to conducting financial analysis or making investment decisions. By that, you will have a better understanding of how they impact a business’s financial profile and be able to make accurate business decisions.

Don’t forget to subscribe to the Shoeboxed blog if you’d like to discover more accounting and bookkeeping knowledge and best practices for small businesses! 

About Shoeboxed

Shoeboxed is a receipt management application that turns your receipts and business documents into a digital format in just one click by taking a picture straight from your smartphone or scanning a pdf. It automatically extracts, categorizes, and human-verifies important data from your receipts so that you can go over and check your records anytime with ease. Shoeboxed ensures you will always have your receipts securely stored and ready for tax purposes.

Access your Shoeboxed account from your web browser or smartphone app. Stay audit-ready with Shoeboxed for FREE now!

Essential Accounting Principles and Practices for Small Businesses

Accounting principles are the rules and guidelines that companies must follow when reporting financial data. These standards are implemented to improve the quality of any business’s financial report. This article will give you a detailed look at small businesses’ essential accounting principles and practices. 

What are accounting principles and practices?

Accounting principles are the standards and criteria that businesses must stick to while presenting accounting transactions. 

In the US, the Financial Accounting Standards Board (FASB) produces the Generally Accepted Accounting Principles (GAAP), a defined set of accounting principles.

Each set of accounting principles’ actual objective is to guarantee that a statement of financial position is accurate, uniform, and consistent. This makes it easy for shareholders to examine and obtain information from its financial statements, such as historical trend data. 

The accounting principles also make it easier to compare financial information between organizations and help reduce fraudulent activity by boosting openness and identifying red flags.

Some of the most basic accounting principles are the following:

  • Accrual principle
  • Conservatism principle
  • Consistency principle
  • Cost principle
  • Economic entity principle
  • Full disclosure principle
  • Going concern principle
  • Matching principle
  • Materiality principle
  • Monetary unit principle
  • Reliability principle
  • Revenue recognition principle
  • Time period principle

Why understanding accounting principles and practices is important

These accounting principles and practices are critical in enhancing the quality of a business’s financial reports. They produce logical and improved accounting statements that accountants can follow and readers can understand easily. 

They also facilitate the comparison of financial statements and serve as the foundation for calculating taxable income. Accounting principles and practices also help investors, lenders, creditors, and shareholders make more accurate decisions for the business. 

Examples of the most common accounting principles and practices

In this part, we’ll take a closer look at the most common accounting principles and practices. 

Revenue recognition principle

The revenue recognition principle requires you to only record revenue when the business has completed the earnings process, not when the associated cash is collected. 

For example, a snow plowing service completes the plowing of a mansion for its standard fee of $500. It can recognize the revenue immediately upon completion of the plowing, even if the house owner hasn’t paid the company yet. This concept is also included in the accrual basis of accounting.

Cost principle

The cost principle requires that a business should only record its assets, liabilities, and equity investments at their original purchase costs. Furthermore, the amount recorded will not be adjusted for inflation or market value changes.

The only exception to this principle is a change in the market value of short-term investments in a corporation’s capital stock that is actively traded on a major stock exchange.

For example, a business purchased an office building for $280,000 in 2015. In 2022, the property is appraised at a value of $400,000. The business may not change the cost principle since this increase relates to the increase in market value. Instead, the business might credit the difference in value to an equity account. Therefore, the actual cost principle still reflects the initial purchase price of the building and not the increased value.

Matching principle

The matching principle requires that when you record revenue, you should record all related expenses in the same reporting period. 

For example, your employee earns a 5% commission on an $8,000 contract signed and recorded in February. The commission of $8,000 is paid in March. In this case, you should record the commission expense in February so that the expense is recognized in the same reporting period as the associated contract.

Full disclosure principle

The full disclosure principle requires businesses to include in or alongside their financial statements all of the information that may impact a reader’s interpretation of those statements. 

For example, business owners don’t want to reveal the real situation of their business to outsiders, such as customers, investors, or competitors, as it can lead to bankruptcy. However, according to the Full disclosure principle, the business is required to disclose such situations in its financial statements.

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The bottom line

Understanding the accounting principles and practices helps complete and strengthen your business’s financial statements, making it easier to analyze and extract necessary financial information from these reports. From that, business owners and investors can make more accurate decisions, manage cash flow, and improve their businesses in the long run. 

Don’t forget to subscribe to the Shoeboxed blog for more helpful accounting and bookkeeping knowledge and best practices for small business owners! 

About Shoeboxed

Shoeboxed is a receipt management application that turns your receipts and business documents into a digital format in just one click by taking a picture straight from your smartphone or scanning a pdf. It automatically extracts, categorizes, and human-verifies important data from your receipts so that you can go over and check your records anytime with ease. Shoeboxed ensures you will always have your receipts securely stored and ready for tax purposes.

Access your Shoeboxed account from your web browser or smartphone app. Stay audit-ready with Shoeboxed for FREE now!