5 Things To Get Your Small Business Rocking!

INTRODUCTION:

Many business owners will go through tough times at some stage and will mean sitting down with the small business accountants and business advisors to determine what steps they should take and in what order.

Here are 5 key areas you should start with and once you have looked at these, take the appropriate action and update your business planning process.

Figure 1: Money doesn't always flow in small business but you can fix it!

1. Look At Cash Flow

If things are tight, you might not be making enough profit but chances are there are some issues with your cash flow that if addressed can free up some cash while you work out how to increase your revenue and bottom line.

Have a look at your aged receivables listing. What percentage of it is overdue? Do you have a system to get invoices out immediately and how is it followed up for payment? Should you change your terms and if so what will be the best way to implement this?

Examine your current debtor days, inventory days and supplier days. Look at the 'gap' and see if it is increasing or decreasing. Once you know what this number is you can start to run some numbers through your cash flow forecast. A three way budget which includes cash flow forecasts are a very good planning tool to do what-if scenarios for revenue, expenses and profit but most importantly cash flow!

2. Focus On Key Performance Indicators

If you have looked at gross margins, wages as a percentage of revenue, profitability as a percent of revenue, working capital, quick ratios and debtor days (refer point 1) establish what needs to be improved first. Usually we will see revenue, margins and cash as the problem childs that need to be addressed.

3. Review Customers

Who are your customers and why are they spending with you or why have they stopped spending with you? Where are they located? Do you have some customers that you don't want because they are too price sensitive (asking for discounts), slow to pay and just high maintenance? What would you like your ideal customer to look like?

Figure 2: Who are your customers and what do they look like?

4. Is It Marketing Or Selling Not Working Or Both?

Marketing is responsible for attracting leads and selling is responsible for converting them. How many leads are you getting from your spend and how many of these are being converted? It's here that you probably need to understand the growth equation and how with some tweaking you can increase revenue and profit simply.

Figure 3: Go through these 5 tips or you could be going around in circles. Photo courtesy Blamian Baz and Lara Scolari Gallery Balmain

5. REview Your Competitors

You need to know what your competition is doing as otherwise you won't be able to establish your point of difference and will either lose customers or start to fight a discount war which can lead your business to its grave.

CONCLUSION:

If things are tough, make sure you do an analysis on the 5 things noted above. If you need help contact your small business advisor or small business accountant as after all, they are there to assist.

Take action to correct the issues before it's too late. Once you come through the tough times you will have a much better business than before and be able to take even more advantage of the good times. This will then provide you with a buffer for the any future tough times!