So you’ve been in business a while, and whilst it’s ticking along nicely, it’s not quite kicking the goals you had in mind when you first started out.

Perhaps you’re continually struggling for cash or you have a high turnover but your profit isn’t as high as you would like it to be or perhaps you’ve launched a product which just isn’t selling.  Whatever the reason is, you simply aren’t where you had in mind to be when you sat down and completed you plan way back at the beginning.

Today we’re going to give you five must-do actions which will help align your existing business with where you want to be and ultimately succeed in achieving your goals.  These “must-do” items include:

  1. Manage Your Cashflow

The most common reason for a small business to fail is a lack of cash.  Not profit.  Cash.  A business can be profitable and yet at the same time have very little cash.

Not understanding the business’ cash position can inhibit decision making or worse, result in poor decision making.  It can also lead to stress, inhibit business growth and potentially strain relationships with both internal and external stakeholders.

For example, a lack of cash may result in late payment of creditors which may then impact the ability to purchase inventory.  Or alternatively, inventory may be purchased without giving any thought as to whether the business has the cash available to pay for it.  Another example may be that due to poor cash management the business has trouble paying loan repayments.

In order to avoid this from happening, the areas of the business which are affected by cash (or lack thereof) must be clearly understood and an effective cash management plan put into place, starting with a cash budget.

A cash budget would typically be broken down into months with the monthly expected monthly expenditure clearly identified.  An opening cash balance at the beginning of the month, and a closing at the end of the month will help to identify times of surplus and famine within the business.  The business is then able to plan effectively for these times and ensure it has the cash available.

Clearly understanding the available cash balance each day, knowing and managing the business’ debtor days (that is, how long clients are taking to pay you), knowing how much expenditure needs to be paid each day are all ways of effectively managing cash flow to avoid potential shortages.

  1. Data Data Data

Learn to love data and make decisions based on the data and not a “gut feel”.  This can be tricky, especially for small businesses where the owner is also the primary decision-maker.  But it is probably more important than ever for a small business to base it’s decision-making on data and nothing else.

Quite simply, this is because decisions based on data, are made impartially and without feeling.  This means if a product line is not performing, it can be cut based on the data and not kept based on the owner’s personal desire.

Creating Key Performance Indicators focussed on particular areas of the business (such as sales targets, margins etc) will help assess the performance of the business itself as well as any staff employed by the business.  This then provides the opportunity for the business to grow and succeed.

  1. Use Lean Planning

Preparing a business plan as well as other financial reports such as annual budgets is extremely important however, they tend to be “set and forget” documents.  That is, they are created, placed in a drawer and never looked at again.

Lean Planning involves a far shorter process which is built upon as the goals and priorities of the business change.  It starts as a one page document outlining the business strategy, tactics (i.e. how is the business going to achieve the strategy), time frame for achieving the strategy and the business model used to achieve the strategy.  Usually on one or two pages.

Everything is then “tested” to see if it works.  If it doesn’t, change it, if it does, keep going.  It’s as simple as that!

  1. Know Your Product/Service Margins

Margins and markups are two different things.  But without understanding one, the other is nearly impossible to achieve.

A markup is the percentage applied to the cost of an article in order to achieve it’s retail price.  Margins refer to the profit made on the sale of an article (i.e. selling price less cost of goods sold).  Both are generally expressed as a percentage.

For a business it is important for every line of service or product offering to have it’s margins analysed in order to determine whether a particular line is performing profitably.  Having a great turnover does not necessarily equate to a fabulous profit but in order for a business to be able to make decisions around keeping product lines, it’s important to know what is performing well and what isn’t.

  1. A Winning Recruitment Strategy

We’ve all done it, recruited the best person EVER…on paper.  Then we’ve discovered (usually after their probation period has ended) that they’re not a great fit culturally or behaviourally.  Then we have the unenviable task of exiting them somehow from the business.

A small business is usually a small team which makes the cultural/behavioural fit absolutely paramount.  Personality clashes in small spaces are magnified ten-fold and can result in lower morale, poor performance, and ultimately and in worst case scenario the departure of our best team members.

Just remember, aside from basic technical information, most systems, processes and procedures can be trained, but personality can’t.  When recruiting, shortlisting based on skills is preferable, but during the interview process personality and behaviour really need to be the key criteria for selection.

  1. Communicate with your Customers

How do you really know what your customers want if you don’t ask them?  Think of this, you spend time creating, developing, testing a fabulous product which you just love.  It’s launched and everyone is thrilled to see it finally hit the market and then….it doesn’t sell.  What is the problem?

Could it be that the product doesn’t fit an area of need for your customers that it just wasn’t in demand.  Could it be that it was too expensive.  How are we ever truly going to know if we don’t communicate with our customers?

Another example, clients start leaving your practice and going elsewhere – why is this?

Communicating with clients and customers on a regular basis does more than keep the relationship alive, it keeps the business informed of what the client wants and how the business is performing in satisfying those wants.  From here the business is able to identify areas needing improvement and those areas which are performing well.

  1. Know Your Competitors

Understanding your competitors and the market you all operate in is fundamentally important.  Being able to benchmark against others, simply knowing what other businesses are doing and reacting accordingly enables a small business to grow exponentially.

For example, a builder quoting on a project would want to have an idea of what other builders quoting on the same project would be doing.  This allows him to be competitive and provide services which the client would actually want.

Knowing what others in the market are doing allows a business to position itself based on what it wants to do and what others operating in the same space are already doing enables more effective decision making.

As a business if you can follow these simple rules there is no reason why the pathway to success is clearer and you can start achieving those goals you set for yourself when you first started way back at the beginning.

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