The big goal of businesses is normally to achieve greater levels of profit. According to a study in 2019 60% of new businesses fail within 3 years, however. 80% of businesses will fail within 5 years. New businesses are launching at an unprecedented rate, with approximately 660,000 new start-ups registered in the UK every year.
Begin with the end in mind
Most of us got into business because we had a vision. Something that inspires you and motivates you through the most challenging times. I often ask business owners ‘what is your vision’? More often than not the response is muddled. Not clear and concise.
It is important that you write your vision down. If you have business partners agree your 3-5 year vision.
Turn a vision into a plan
Book in a strategy session with your business partners to map out your high-level objectives. Discuss where are you now? And answer the following questions:
- What do you want the business look like 3 years from now?
- How will your role look like in 3 years?
- What do you want your personal life look like in 3 years time?
Involve your team and ask them the same questions. If management and staff are pulling in different directions then you’ll not achieve your vision.
Appoint a team member to manage the plan. This person should hold the team accountable for planning, assigning and completing tasks and moving the plan forward.
Numbers and key metrics
Business owners almost always want to have more time and money. This can be achieved by increasing profit, having less debt and working in a business which doesn’t rely on you.
To achieve greater levels of profit the business will need to grow. You will need to create a profit and loss forecast. This should align with the objectives of your business plan. Start with a 12-month forecast.
Identify the key metrics which will allow the business to achieve it’s forecasted numbers. An example of this may be increasing sales 10% each month. Reducing annual expenses by 12%. Plus halving monthly loan repayments, improving positive cash flow.
The hard part is taking the correct series of actions to achieve the desired outcomes. How will you achieve 10% sales growth each month? Well, the answer isn’t wishful thinking. Many small and micro businesses adopt a fingers-crossed approach.
If the business plan is the trunk. Then the marketing plan would be a branch. Which has a direct link to sales. Often sales and marketing departments don’t communicate with each other. Crazy right?
A client services business will have different tactics to a business which sells products. Whereby a customer has a specific need, buying perhaps only once in their lifetime.
Let’s look at services businesses. Sales growth can be achieved by retaining existing clients and selling more higher-value services. Plus adding new clients. If your service is project-based can you provide ongoing services on a retainer? Or targeting more profitable projects?
Conversations open doors
If we want to achieve sales growth we need to be having ongoing conversations with current clients. Understanding their goals, frustrations and fears. Educating them about how you can offer a solution to their current problems.
The job of marketing is to fill up your pipeline with leads. Sales is turning a lead into a prospect, then converting to a client. If your business needs 10 new clients a month to achieve the sales target. And your conversion rate is 50%. You will need to be having 20 conversations with qualified prospects a month.
If your business does not have a system for managing leads and prospects it is vital you get this information out of your head. Then onto somewhere visual whereby this is constantly reviewed and measured.
Profit first approach
Most business adopt this equation:
Sales – Expenses = Profit
To turn around the way business owners think about profit, Mike Michalowicz introduced this formula:
Sales – Profit = Expenses
Under this formula, profit is prioritised. In practice, you could set aside a predetermined percentage of your sales for profit. Meaning you can only afford expenses in excess of profit but not greater than the value of sales.
You should also factor in taxes, debt repayments and owners pay. Stop any recurring payments and cancel anything you don’t need. Pay off your smallest debt as quickly as possible.
Accountibility, review & coach
One of the things our client’s love about working with us is the accountability factor. We review financials and review progress throughout the year. These goals include achieving greater levels of profit.
The financial and non-financial data has real purpose and value. Ultimately a big driver in improving performance and achieving results. The review meeting includes coaching. Where we set SMART goals and tackle burning issues.
Location means where are you now? In this post we’ve really just touched the surface about what’s possible with proper investment into the finance function of your business.
Too often SMB’s (small micro-businesses) neglect their businesses strategic and finance function. Hoping for the best, not prepared to make the investment they need to achieve the life-changing results they actually desire.
The problem is mind-set. Afterall accountancy and business advisory services in many ways is intangible. Meaning you can’t easily see it. If you go buy a new car you can drive it, feel it, smell the leather. Or buying new clothing you can wear it and it normally makes you feel good.
You can have these items on the same day! Whereas investing in your businesses finance function can take several, weeks, months or even years to see notable visual results. Results are achieved by continuous incremental improvements, which overtime compound to bigger gains.
The best advice I can give is ‘if you don’t start, you won’t finish’.
Take action today
If you want to achieve greater levels of profit we offer a free no-obligation consultation, so come and have a virtual tea or coffee with us.