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Stress proof your business and your life

Friday, August 27th, 2010

Owning and running a business can be incredibly stressful. So we have decided to do something about it by writing a book called “Stress proof your business and your life”.

 You can find it on Amazon at £12.99 – but you are welcome to a copy with our compliments.

 But please don’t be put off by its title, since it is categorically not only for people who are stressed. In fact, one of the key benefits from reading it is that you’ll get dozens of excellent ideas for putting a great deal of extra cash into your business and personal bank accounts.

 There are four parts to the book.

 Part 1, Stress proofing the business stuff, looks at what people can do to reduce and prevent the stress caused by their business and its financial situation. And it provides simple yet effective solutions to common challenges such as:

  • Not making enough profit
  • Running out of cash and other similar cashflow problems
  • Being forced to work more than you want to
  • Having too many things on your to-do list
  • Too much depending on you, and too many things that can only be done by you
  • Not getting the right life-work balance
  • Not having the information you need to make sensible decisions
  • Losing too much of what you earn to the taxman
  • Other people, especially customers and your employees, behaving unreasonably or unfairly

 Part 2, Stress proofing the money stuff, looks at what people can do to reduce and prevent the stress caused by their personal financial situation.

 In these first two parts much of the emphasis is on strengthening the financial and business fundamentals – since they are so often the primary sources of stress and anxiety for business leaders. But strengthening them is also extremely worthwhile for people who aren’t suffering from stress.

 Part 3, Stress proofing the personal stuff, broadens the discussion by explaining how to reduce and prevent the stress caused by the other things going on in people’s lives.

 Finally, Part 4 brings it all together into a practical action plan.

How to get your FREE copy 

So, would you like a copy?  We would be happy to send readers of the blog a complimentary copy….all you need to do is drop us an e mail or call the office on 01422 365981 and we’ll get one sent straight to you.

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Posted in Business Development, General Business, Profit Improvement, Recession, cash management | No Comments »

Lessons From The Recession

Monday, August 9th, 2010

I don’t think many will disagree that the last couple of years have been difficult for most small business owners.  The lack of readily available cash and customers has made some small businesses think hard about what they are doing, whilst some still seem to be content to “baton down the hatches” and await economic recovery.  During this period, the businesses I have seen perform the best have all  possessed similar traits.  They have applied the lessons below and all still talk positively about their business and it’s prospects.  Sure they admit it’s been tough but some of them are experiencing better periods of growth than ever before.  So what have the key lessons been?

 Lessons

Pre recession we were lazy with our finances.  If debtor days reached 90 days we didn’t bother too much as the banks would bail us out with loans and overdrafts.  Now we need to live on cash generated from our customers and the effective collection of cash has become a priority.  We didn’t concentrate too much on pricing as there was plenty of business to be had to make up for margin shortfalls.  Now pricing and margins are critical to business success.  We need to avoid models which are just centered around lowering prices and offering discounts, unless there is an infrastructure in place that backs this up.  Price wars rarely work as there is always someone who can do it cheaper than you.

We were lazy with our marketing.  In times of abundance there was plenty of business around and we didn’t have to fight very hard to get at least our natural market share of what was out there.  Now the markets are smaller and customers are more choosy where and how they spend their money.  I remember talking to a mortgage broker not long after the recession had started.  For many of the years prior to the recession he had had constant leads passed to him from estate agents.  He had never had to market his business and was making lots of money.  As soon as the housing market went “pop” he had absolutely no idea how to attract new clients.

 Innovation and creativity in small businesses wasn’t always considered.  There has been an explosion of “me  too” businesses in the good times, businesses which were essentially copycats of all the others in the same industry.  Even now, when we attend networking events, we see many businesses that look the same (apart from the name) and there is no differentiation in their promises or offers.  No longer is it acceptable for a business owner to say that their unique selling proposition is “great service” or “personal service” because that’s what they all claim to offer!  There needs to be clear difference in the service offering, tangible benefits to fit with consumer needs.

 We were lazy with our processes and systems.  We may have had labour intensive businesses, but it didn’t matter because the sheer volume of work available meant we still made a good profit.  Now, we need to think “McDonalds” and ensure that we have systems which help deliver better and more consistent service, which are much more cost effective and efficient than what we are used to.

 Customer service certainly wasn’t king.  How many times have you received poor service in a restaurant or shop?  How many times has it taken your website designer weeks to return your e mails?  Pre recession it didn’t matter as there would be someone else along tomorrow to take their place.  Keeping your customers happy and keeping them coming back for more is now vital to making a success of your business.

 The Frog and the Boiling Water

 I’m sure you’ve already heard the story….If a frog is dropped in a pan of boiling water it jumps straight back out.  It takes action!

 During the last two years I have seen many business experience fantastic growth.  These businesses weren’t necessarily business built up to deal with particular recessionary issues.  They had been around well before the recession started.  However, they realised what was going on around them and took action….they did something.  By considering the above points and taking action they have not only survived, but some have experienced some of their best years of growth.

 What lessons have you learned over the past couple of years?

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Posted in Business Development, General Business, Profit Improvement, Recession, cash management | 2 Comments »

Who is your ideal client?

Thursday, June 17th, 2010

At a networking meeting yesterday, all the members were asked to make an elevator pitch about their business.  As part of the pitch, each member had to include “who would be an ideal referral for your business”.  It was surprising, how many members responded to this with “anyone” or “any small business owner”.  From attending these meetings regularly I have learned that the more specific I am about asking for referrals, the more I seem to recieve.  For example, one week I asked to speak specifically to hairdressers, the next business owners looking to buy commercial property (as we can help them reduce their stamp duty).  Now the reason most others don’t do that is that they are frightened of missing out on other potential introductions.  However, the reality is exactly the opposite – I know, I’ve tried it!

Why the “anyone” strategy doesn’t work

The “we’ll take anyone” strategy doesn’t just apply to asking for referrals at networking events.  It’s often present all the way through a company’s customer acquisition drive.

By using this strategy, you attract all the wrong types of customers, who don’t help you move towards your end business goal.

Typical examples include customers who are fee sensitive, non profitable, are a drain on your resources, don’t take your advice or who constantly scope creep projects.

If  your business is full of these types of customers, will you ever reach your goals of profitability or being happy in your work?

Ok, it’s easy to say don’t accept just anyone, but it’s not that easy when you are trying to build a business quickly.  However, if you can accept that the business will grow a little more slowly, then there is no doubt that you’ll see the benefits – both in terms of profitability and hassle.

How to get that ideal customer

First things first, do you know what your ideal customer looks like.  What industry do they work in? How big is their business? What age group are they in?

Take time out and draw up a list of all the differant attributes that your ideal customer should possess, and take note, the list should be longer than “anyone with cash!”

You may already have some ideal customers on board.  What characteristics do they have in common?

Think like the big boys here – Supermarkets, Banks and other major players all use this type of method.  Once they have identified their ideal customer, they target them through marketing.

Once you have your list, you then need to work out how your service will benefit them and how you can get to speak with them.

A great example I saw of how not to do this was some time ago with a company that wanted to target Accountants.  He approached me at a business networking event where I was the only accountant present (and always would be due to the exclusivity “deal” you get with the networking group when you sign up).  So, by attending this meeting he got to talk to just one Accountant.  Sure, he’d done his homeowrk on his ideal client type, but then had put no research into where he’d get to meet them.  If he continued in this manner, it’d probably take him the rest of his business career to speak with only a small proportion of his intended audience!

Do you know what your ideal client looks like?

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Posted in Business Development, Profit Improvement | 1 Comment »

Working on your business – Whats that all about?

Friday, June 11th, 2010

Here at Accountancy Extra we are huge fans of Michael Gerber and the book E Myth Revisited.  So much so, that we provide new clients with a copy of the book.

In the book, one of the concepts discussed is “working on your business, rather than in it”, but what does that really mean?

Working on the business includes activities such as

  • Networking meetings
  • Researching a new product
  • Working on your cashflow
  • Putting together a business plan
  • Reviewing your gross margins, or
  • Systemising your business

How often do we start to do one of the above and then abandon it as a customer calls wanting something, or we need to attend to an urgent e mail from a client?

I often think about running a business a bit like preparing for the World Cup.  A top class footballer doesn’t just turn up 10 minutes before kick off and expect to be brilliant on the pitch.  Instead they invest years of training for their big moment, and, once they’ve made it into the international team, they continue training in between matches.  If they don’t, their performance will not improve – in fact it’ll probably go backwards and their place in the team will be taken by another player.

So what does that mean for your business?

Well firstly, it’d be great if you could do your preparation before starting your business.  Sadly, this is rarely possible.  However, constant investment in improving your business should be high on your list of priorities, if for no other reason than to stop you slipping backwards!  A lot of business owners start off with the right intentions and then let them slip as they get busier, i.e. they revert to Technician Mode.

You should set time aside each week to work on your business, think about the footballer in training each day.

Working “on” your business is exactly that – setting time aside each week to do all of the things mentioned above and more. Taking the time to look at how your business is performing and how you can improve. The main reasons why most Business Plans and Budgets don’t work for you is because they have no clear action plan broken down into what you need to do on a monthly and weekly basis (We’ll cover this area more in future posts).

 How much time have you scheduled into your diary in the next few weeks to look at how your business is performing?

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Take Care Of The Details

Thursday, May 6th, 2010

How many times have you heard the phrase “the devil is in the detail”? and how many times do you consider the impact of details on the performance and image that your business portrays to potential and existing customers?

When we are in our businesses 24/7, we often lose sight of the small details that actually have a major impact on the people we need to impress most – our customers or clients.

Have you ever been to a networking event where someone has passed you a “dog eared” business card or one of those poor quality cards that you get free?

Have you ever visited your solicitors office to see files and paperwork scattered randomly across their desk?

The president of an American Airline once said “coffee stains on our flip trays tell our customers that we don’t service our engines properly”. OK, it’s unlikely that if you are reading this you run an airline, but can you see the point?

The state of your business cards or desk gives an impression about the standard of service he can expect from you, however right or wrong that is.

Step Back

Take the opportunity to step back from your daily grind and look around at your workplace, your marketing materials, your website and the way you are dressed.  Decide whether each of those things are up to scratch and if they aren’t, then do something about it before you  lose any more business.  Make sure everyone in your team is aware of how important detail is and ensure they know and apply your new business standards

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Posted in General Business, Profit Improvement | 1 Comment »

Boost your Profits – instantly

Wednesday, February 24th, 2010

Business owners are always looking for ways to increase their profits, or to keep more of what they earn. 

There are two common ways that a business uses to try and generate more profit, which are:

• Increasing their sales volume
• Cutting costs

But there is a third and much more successful way

Consider a small retail business which turns over a modest £100,000 a year, with a gross profit margin of 40% (The gross profit margin is calculated as sales less cost of goods bought divided by sales) and other expenses of £20,000.  The profit statement for his business would read:

Sales                                        £100,000
Cost of goods bought                    £60,000
Expenses                                    £20,000
Profit                                           £20,000

If we follow our two most common profit improvement strategies mentioned above and change the figures by 10%, we’d get:

• An increase in sales of 10% would generate additional profits of £4,000
• A decrease in costs of 10% would generate an increase in profits of £2,000

Our two favourite strategies would add some bottom line benefit but involve a lot of hard work.  After all, how hard is it to increase your sales by 10%, or cut your costs by the same.

As a third option, why not consider putting your prices up by 10%?

Just by putting your existing prices up by 10%, you could generate an additional £10,000 in profits.  That’s 5 times the benefit of cutting costs and 2 ½ times the benefit of selling 10% more

I can hear the voices of dissent already saying “yes, all very well and good, but my customers would leave if I put the price up”.  Ok, so maybe a proportion will, you’ll always have a price sensitive section of your customer base.  BUT, if you increase prices by 10%, you can afford to lose 20% of your volume before you are back in the same profit position as you are today.

So, that’s 20% less work for the same money that you are earning now! That effectively frees up a whole day a week to do something else.  Of course, you could use that day to bring in more business and be even better off!

The extra twist

What’s quite frightening is that during a recession, many businesses are looking at cutting selling prices, rather than putting them up.  Did you realise that (using the example above) if you cut prices by 10%, you’d have to sell 33% more to make the same money as you do now.  That’s a massive extra volume!

So how can you put prices up and stop customers leaving?…..differentiate, be different in your market place and price almost becomes an irrelevance

What are your experiences of changing your prices in the last couple of years?

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Posted in General Business, Profit Improvement | 4 Comments »

The Power of Benchmarking – aim to be the best

Sunday, August 9th, 2009

Sitting in front of a potential new client this week, I was reminded how sometimes business owners can become very inward looking and focus just on their business, without really being aware of what their competitors are doing.

The lady in question ran a pub, which had a reasonable level of turnover for the size and location.  However, her net profits were very poor and always had been.  She just blamed it on “well that’s how things are in this business”.  When I probed a little further and asked how she knew that, she just shrugged and replied “well I just presumed as all the Landlords I know are always moaning about being skint”

So in effect, she didn’t know that net profits should be poor, she just presumed it.  Even worse was the fact that her existing accountants had not bothered to sit down and discuss this with her.

She had provided me with her last set of accounts and from that I analysed the figures, both against existing clients and against benchmarking data that I have access to from across the UK.  We could quickly see what was wrong with the business and where the main problems and financial sticking points were.

If the lady in question puts only half of the suggestions we made to her into action, then she’ll be able to sustain a much better lifestyle in the future.

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Not all new business is good new business

Monday, July 20th, 2009

I was reminded whilst talking to a client this week of the phrase “not all new business is good business”. It was taught to me very early in my career and has been one of the best pieces of business advice I’ve ever received.The client in question (let’s call him Bob) had taken on what looked (on paper) like a great project from ABC ltd. Looking purely at the levels of revenue it would bring, his company’s turnover would be up significantly. They were as happy as happy could be.

Then the problems started…

The emotional Vampire

Initially, everything went well. Bob started working for ABC and did a really great job of keeping ABC happy for the first few weeks. However, ABC became more and more demanding and started to “scope creep” in the project. (Scope creep is the term used to describe when someone adds what they hope will be ‘free extras’ to what they originally agreed to, with a supplier.)

At first, Bob didn’t mind throwing in the odd extra to keep the client happy. However, as time wore on, ABC started to become an emotional vampire to Bob – they sucked his energy right out of him.

Their demands became ever more ridiculous. They’d call him at all hours, demanding changes and updates, all at no extra cost! His existing clients became increasingly frustrated, as the levels of service they received dropped, now that Bob was concentrating more and more on ABC limited.

Bob and I sat down and reviewed the project. He’d done quite a lot of the right things at the beginning of the project. He’d worked out a price based on the resources he thought he’d need for the project (this is in an industry where hourly rates are the norm). He had analysed the time that would be needed and when he would need to be working on the client. He told ABC ltd what the end date of the project would be, what the different stages where in getting to that end point and what input would be required from them.

What he hadn’t done was to be specific enough about what wasn’t included in the project and how any extras would be billed!

Turnover is vanity, Profit is sanity

When we looked at the profitability of the project, Bob would be very lucky if he were to break even. In fact, if you include the opportunity costs of potential work he missed out on and factor in the unhappy existing clients, he will have made a LOSS.

Bob still protests that ABC brought him in so much revenue that he couldn’t refuse the work, but accepts that he made a number of mistakes along the way. His primary mistake was not being specific enough in the contract terms. His second mistake was to focus too much on the revenue, without factoring in profitability.

Judging from the number of emails I receive, it seems many businesses have had similar experiences to Bob. More importantly, how can you ensure this never happens to you and your business?

Here are a few suggestions:

• Listen to what potential clients say at opening meetings very carefully. If they try and barter on price then there could be warning signs about future behaviour
• Put together a list of what is included for the price and equally what isn’t. Explain how extras on a project will be billed
• When a client phones with scope creep, make sure you use the line “last time we did that for a client, it cost an extra £x, is that ok with you?”
• Invoice the client as you go for both extras and the original project fee. It’s amazing how extras add up and clients could be shocked with a big bill at the end.
• Get as much as you can in writing. Yes it’s easy to take down some additional details over the phone, but if the client comes back and claims that he didn’t ask for that doing, you’ll be left high and dry
• Always focus on the profitability of a project. Turnover is vanity and profit is reality. So what if a project adds £100,000 to your turnover. If you don’t make any money on it, why bother. It’d be much better for you to spend the day at home!

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Watch & Use your breakeven point

Saturday, April 11th, 2009

break_even_point_neurmadicaestheticflickrYour breakeven point is that point in time when your income equals your expenses.  Once you get past that point and your income exceeds your expenses, then you are making a profit.  If your expenses exceed your income, then you are making a loss.

All that sounds relatively straightforward, I’m sure.  But knowing what your breakeven point is within your business is absolutely vital.  If your business doesn’t sell enough to meet it’s everyday expenditure and support you as the business owner, then you are going to be in trouble, sooner rather than later.  By knowing the level of sales that you need to hit your breakeven point, you’ll have a target each day, week and month that you know you need to hit, just to stay in business.

A tale of two businesses – The impact of breakeven analysis

I’ve had two seperate conversations in the last couple of weeks about breakeven points with business owners and they both showed me the power behind knowing or not knowing where the breakeven point was.

The first business owner sold consultancy based services to their clients and charged on a time spent basis.  They knew that if they charged 40 hours per week at £x per hour, then they would have a gross sales revenue that would represent a good income.  However, they had no idea that to actually cover their overheads and personal expenditure each month, they had to charge out 30 hours per week, i.e. 3/4 of the total chargeable time available.  Once we’d worked out how many hours per week were spent on non chargeable time (meetings, research, training etc), it soon became clear that there was a problem.  Indeed, the business owner commented “so that’s why I don’t make any money”.  Once they knew what they had to achieve, they went away to change the business model and re look at their pricing strategy.

Compare this to the owner of a local chain of sandwich shops.  He knows, on average, how many sandwiches he needs to sell each day to break even and he records this.  At 3pm each day, he calls all the shops and asks for the sales figures, not just the £value, but the volume as well.  He understands the gross profit margin on his sales values and as he knows his breakeven point, he can quickly work out a rough profit figure for the day.  He records all this on a spreadsheet and regularly monitors his calculations against the “real results” when his books are written up.

Increase your profits, know your breakeven

Make sure you fully understand  your breakeven position.  It is one of the most powerful business tools you have at your disposal.  Armed with it you can make informed desicions about your pricing strategy, staffing levels, marketing strategy and expansion plans.

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Posted in General Business, Profit Improvement | 2 Comments »

Show me the difference part 2

Saturday, March 28th, 2009

I posted last week about quantifying the difference  between you and your competitors so that you stand out in the crowd.

I thought it may be a good idea to share with you a couple of things that local businesses are doing right now to differentiate:

  • A local restaurant has bought two people carriers and runs customers home free of charge after their meal.  Customers find it great as they don’t have to worry about booking and waiting for taxis and the restaurant makes it’s money back through increased loyalty and the fact that all customers can enjoy a drink!
  • A local dentist sends text messages to clients reminding them when their appointment is due.  What a great way to ensure that your clients turn up on the right day and time (after all, they may have booked the appointment six months earlier).  It’s reduced their no shows considerably

And finally, the last time I booked my car in for a service, I did it all over the web.  I was presented with a calendar and chose the time and date that suited me.  I also entered the details of the car and which services I wanted.  the website immediately gave me a fixed price quote for the work, so I knew exactly what it would cost me.

I’ve got to admit, I’d never used the internet for booking a car service before, so I was a bit dubious that it would all work properly.  Surely I’d turn up and there would be lots of extra costs not included in the fixed price, or would I turn up only to be told that they weren’t expecting me?  I was delighted to find out that I was wrong on both counts.  They were ready when I arrived.  They even spotted me on the way in and as they knew my registration number, greeted me “hello, Mr Ramsay”.  The service was done to schedule and there were no additional costs…….I’m impressed!!

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