Posted: 2010-08-04 / Author: Peter McGahan Managing Director of Worldwide Financial Planning
A Profitable And Prosperous Business - 7 Top Tips
In 14 years of working with SMEs around North West England in the capacity of an Advertising and Marketing Consultant one thing that really stood out to me was the number of business owners who had no goals, no real plan, some had never even given a second thought to what their business would look like in the future. It may be rude but a wake up call can sometimes be helpful so I will tell you that some of our people used to refer to many of them as the self-employed unemployable. However, over the years I found that anyone, with a little guidance and a bit more organisation can certainly do better, and many can go from mediocre to highly successful with just a few well thought out changes.
So let's get started. Let's have an out of the business experience. Be honest and look at your own business objectively but from someone else's perspective. Perhaps someone who might be evaluating the business with a view to buying it. One of the best ways to riches can be to start a business and then build it up to the point where it is a desirable asset to a prospective business owner. Let's examine your business. Be dead honest, after all no-one else needs to know the answers but it might change your life if we can hit on only one or two points that can together make a huge difference. Do ten things one percent better and you will have an exponential improvement far in excess of 10%.
Tip 1 Define Your Business Goals
Someone once said, and I can't remember who, "What will it look like when it's done?" Well another good question might be "When will it be done?" Now if you are just pottering along owning your own job this article is probably not for you, but if you are building something that you can leave to your children or sell as a going concern to produce money for retirement then those two questions are really important.
A deadline and a result has to be the place to start. Maybe it could be purely time based, say 5 years or 10 years from now or maybe it would suit you better if it was event based, when I am 50 or 65 or when my daughter is 21. It doesn't matter but that time is important and then the time line between now and then can be broken into manageable steps. What will it look like, maybe in terms of turnover, or better still, in terms of profitability? What other things are important to me when I get there? It may be that you can run the business from your laptop and only call in on a Friday afternoon to see how much money you have made. Money is not the only measure but it is a good measure and one that any prospective buyer will look at first and last.
When you put your heart and soul and years of your life into something it will have a certain softer benefits. There will be things about your business that may mean a lot to you and your family and carry great sentimental value but they will mean nothing to a buyer. Sorry but that's just the way it is. That aside, think it through, where do I want the business to be at the chosen date. Then take a good long look at where it is now. What would be the various ways that you could there and then, with what you have or what you can quickly get your hands on in the way of finance, resource, technology, education, what is the best way for you right now?
Tip 2 Cash Flow is King
A huge percentage of small businesses cease trading in the first year of business because they are under capitalized. Having the money to pay your suppliers, to pay the VAT when its due, to pay the wages if you have employees is as important to your business as the blood traveling through your veins carrying oxygen to your muscles. When the cash runs out the business is dead. Now that doesn't mean that you can't use your overdraft or a good line of credit but the front page of the Daily Mail on Feb 16th 2010 says that 60% of UK firms applying for bank loans during 2009 were refused.
Assuming you could get the loans you asked for, credit interest has to be serviced and when all the income goes to paying bills, taxes and bank interest it is really hard to figure out who you are actually working for. I have often heard the complaint from customers that they didn't know if they were working for the taxman, the bank or the advertising directories. They usually agreed that it was Thursday afternoon or Friday morning when they actually started working for themselves. I know they were joking but there's many a true word spoken in jest.
If your work is divided between business to business and domestic customers, ask yourself which ones pay quicker? Even if the commercial job looks more lucrative, think about how long they will take to pay. I am not going to name names but I know of some really big companies who are household names taking so long to pay their smaller suppliers and hauliers that the small companies have folded whilst waiting for their money. Getting a job is one thing, getting paid is something else again. Never be so desperate for work that you put manpower and stock on the job without getting written assurances of when and how you will be paid.
Tip 3 Get New Customers
Every business likes its loyal customers but every customer was new once. Without a fresh supply of customers the very least you will do is stand still but with people moving, businesses winding up and people retiring and dieing in reality it doesn't take long to start going backwards.
The old advertising methods may still have some value but are definitely not as reliable as they once were. Once almost everyone would pick up the Yellow Pages for anything from a signal box to a book on fly fishing but now it might be more for the emergencies in life. Ask yourself what you do when you need a service or a product, I know I am on the internet so much more these days I can't even tell you where the directory is. I am 53 so its not just the teens and twenties that are surfing for what they need.
There are ways to generate inquiries on the internet that don't cost much money but there is no free lunch. You will have to learn your craft and it will mean spending time getting an education. Having said that though, suppose you wrote an article like this one but about your particular business it might take a couple of hours to write and publish but it could be working for you, helping and educating your prospective customers, for years to come. Pay for an advert in tonight's newspaper and you will need to pay again tomorrow.
One way or another you need new customers and the cheapest way to get them has to be the best way provided the quality is right. On that subject, please take this little piece of advice, don't work for anyone you don't want to work for, you are not obliged and you did not go into business to work for people you don't like. You're not desperate, so work with people who will appreciate you and gladly pay your rates.
Tip 4 Increase Your Value to the Customers You Already Have
If you look after them, they will look after you. Its so much easier to use a supplier or service you have used before and have come to trust than it is to look for a new one. Relationships have always been important and they are becoming more so as we live further apart in our virtual worlds. The best customer is a returning customer and the next best customer is a referral. Word of mouth advertising is more powerful than anything else.
Think about what other products are closely related to your core product that you could supply to your existing customers. I know a business that was selling vitamins at 15-40 a month for years when suddenly the bright idea came of selling the same customers massage therapy beds and chairs at between 4K and 6K. You have to sell a lot of vitamins to produce the cash flow that one of them chairs brings in but it also works the other way round, a customer who spends 6k on a chair might add to the monthly income of that company for years to come. Take that idea and think about how you can apply it to your business.
Tip 5 Control the Overheads
Every business has its costs. Premises, Wages, Insurance, Taxation, Utilities, Advertising, Transport etc. In these times it is prudent to look at all these areas more often just to see if it might be possible to tighten the belt here and there. But do be sensible. If your advertising program is bringing in much needed extra business it might be possible to revamp it and get more business but don't make changes here just to save money. Better to let the cleaner go and sweep up yourself than cut off the lifeblood of the business.
Do you need that particular car though and would a different premises help the cash flow. Can you have home based workers or can modern technology replace wages or could outsourcing get the job done just as well and save the business thousands. I know loyalty to staff is important and many business owners are taking a lot of the load themselves to support their workers but that can only go on for so long and the business must survive for the benefit of the owners and the majority. Could you use less rooms used to save heating, lighting etc and if you have the ability to do that maybe you could sublet the extra space to another business that might ideally complement yours. That would not simply save money but would provide another source of income.
Tip 6 The Mastermind Group
Surround yourself with other business people and create an environment of encouragement and support. I will say that again in a different way. Do not tolerate other business people who come and sit in your premises and drink your coffee and drone on about the state of the economy, the inefficiency of the government, the way things used to be etc. etc. Fortunes that last are made in tough economic times, its when the going gets tough the tough get going.
Sympathy is not helpful when you are looking for solutions because it tends to focus on the problem. Whatever the situation looks like now your focus needs to be on how you want it to be. You can lift others and they can lift you. A good idea that worked for someone else might be easy to adapt into your own business. What looks like a hopeless situation to one person might just spark an idea in another that will change things for everyone. Everyone thinks that their business is unique and that their particular problems are special but that is really not the case.
How about sharing technology. Sharing education. There is a lot to learn for instance about the new ways to create business online. It's a minefield to the uninitiated. How about sharing a new media worker between 2 or more businesses and developing internet solutions that can work for everyone. How it all works can take up a lot of your time and energy when really all you want is the end product. How about setting up affiliate alliances between carefully matched firms. How about selling leads on when you have too many instead of just turning work away. Join a lead swapping breakfast club or the local Chamber and always keep an open mind. It only takes a little sideways thinking to fit somebody else's good idea into our business. You will have heard it before but try to think outside of the box.
Tip 7 Only Believe
If your business can't be the best in your industry, in your locality then why bother. Most people are not willing to put in the effort. They are not willing to do whatever it takes to be the best. If you will commit just to do all the basics right you will automatically be in the top 10%. Follow the rest of the tips above. Read everything you can regarding your industry and the important ideas that surround it, for example marketing, closing sales, customer service etc. be willing to risk trying some of the ideas you get as a result and you will be the best. I believe you want to be the best or you would have not read this far, and if you really want to, I believe you will.
So many Small Business Owners live in their own bubble working so hard in the business they forget to do work on actually making the business work better. So to come full full circle, how about deciding now to take a full day out say once a quarter, gather everyone concerned together, just to have an out of the business experience to brainstorm the way forward.
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