Take control of your business
Posted 13 Nov 12 by Andrew Beattie
Today's economic conditions have many business owners re-evaluating their operations in an attempt to improve performance.
Yet, time and time again we see businesses failing because they focus on the wrong things.
When considering your business' performance you must concentrate on the things that you can control, which coincidentally will also have the most impact. How can you control the economy, a financier's interest rates or your competitor's prices? The reality is you can't.
So what factors should business owners be concentrating on to achieve success?
How would your employees describe your attitude?
A positive attitude is the cornerstone to business success. You can choose to try and ride out the storm in tough times, or you can actively try to improve your business. Once you have this positive attitude instilled into your business your energy and passion can be channelled into business improvement.
It is important that you have a clear plan for your business and ensure that it is understood and consistent across business. This requires constant communication with everyone in the business and feedback up and down. It is important that everyone is pulling in the same direction to achieve the desired business improvement. If they aren't then you need to identify who these people are and address the situation sooner rather than later.
Make sure you understand the make-up of your sales and be aware of the trends.
If you are experiencing a decline in sales or growth isn't as you expected, take a look at your sales team. Are they focused on selling? Do they share the same positive attitude about the business as you? How do they go about their customer calls? Are they spending the appropriate amount of time with the right customers or prospects?
You need to be able to answer these questions, and during this evaluation you may find that some staff have performance issues or need further training . Once you identify the issues, you can take action to address these problems.
4. Create raving fans
Determine what it is that you do that creates value for your customers and ensure you promote this. If you are creating value and creating raving fans than your customers are more likely to stick with you and even refer new customers to your business.
On the other hand, if you look through the eyes of your customers and identify areas that need improvement then get it done otherwise financial loss will likely follow.
5. Increase your selling price
Before you fall off your chair consider this; if you provide your customers with a product or service which they truly find value in, they are more than likely to accept a price increase.
This may not be as simple as applying a price increase across every product line. Strategies might include remaining competitive on your top 25 products but increasing your price on all other products; selectively applying a price increase where appropriate; or categorise your customers and price them accordingly.
6. Review your approach to discounting
There are times when discounts are required to win a particular sale. But, in many cases this becomes a default position as businesses see it as a customer expectation.
When a business discounts its prices, it needs to make a lot more sales to make-up the loss in margin. Once you decide on your approach to discounts, enforce it with your staff. Know your breakeven point and ensure you are not discounting too far. You are better off missing some sales than winning on thin margins and setting a dangerous precedent.
7. Stock analysis
Look at your stock turnover rates, individual product margins and inventory levels. Improve your inventory management to help free up cash flow, and efficiencies will begin to arise.
Start by looking at how you can reduce overall inventory levels while still maintaining on-time delivery targets. In today's business environment, your suppliers can get a lot of your stock and materials to you quite quickly so consider how much you actually need in your store or warehouse. This process will also help to reduce obsolete or out of season stock levels.
8. Review supplier terms
Make sure you are getting the best terms from your suppliers and taking advantage of any discounts they might offer, like reductions when you make upfront payments. Determine if paying early works for you, but more often than not there are benefits to be gained. Don't fall into the trap of purchasing more than you need just to get a discount, especially if it is for low volume, slow moving stock.
9. Reduce overheads
All businesses need a core level of overheads to achieve top line targets, so take care in how far you go. We see a lot of businesses 'slashing' costs when they are doing it a little tough, but with no real plan.
When evaluating business costs, see if you can reduce them to an appropriate level or get more leverage from necessary expenses. You should also look to reduce inefficient practices that were born from more prosperous times. Overheads that are going to have the biggest impact, and therefore require more of your attention, are generally rent, wages, advertising, utilities and finance costs.
So how do you put all of this together?
To get on top and stay on top of these important processes you need to ensure you have the right information in a timely manner. Without this, your decision making could be flawed.
End of year financials are not enough. All businesses should have a financial forecast/budget with an integrated cashflow that is updated regularly. Reports or analytics such as stock category reports, a monthly sales pipeline report and an opportunities report will further refine your decisions and ultimately your results.
In tough times the difference between successful businesses and those that just get by is that of taking action rather than just sitting around and waiting for things to get better. As a business leader you must have the right attitude to lead your business through this economic downturn and focus on what you can control. As Charles Darwin once said "It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change".
Contact one of our Business Advisory specialists or your PKF Lawler Client Relationship Manager for more information.