We covered looking at your balance sheet some time ago, and wanted to refresh you on why it is so important.

Building up your balance sheet can help you with your future with the business, if you were ever to sell your company on to a potential buyer, this is an important area that the buyer will be looking at.

Its not just about profitability and turnover, the balance sheet is an indication that you are growing your branding, a business that has thought about strengthing and building up the balance sheet is worth considerably more than one that focuses just in the present.  ie turnover and profit.

The example we have below, is fine for a small business and will probably have a good credit score as its positive in both the net current assets (Working Capital) and the overal value.

But if youre talking about a business thats worth selling you are going to need a plan, this could be a 5-10 year plan, its certainly not short term.

Will need to be assets in both the fixed assets sections and current assets, this could be by buying equipment or machinery to make yourself more efficient and do a higher volume, buying a company with skills or equipment that brings Goodwill into the assets section, quite a lot of larger companies do this, they purchase mailing lists, and client lists, from smaller companies, to rapidly increase their net worth, and increase turnover.  

Current assets would be building up your turnover, and therefore your debtors increasing. Keeping an all important eye on the costs, and keeping the creditors to a reasonable level.

Long term liabilities are usually loans that are paid more than one year ahead, and maybe the director loans, if the owner hasnt taken back all of their investment.

The balance sheet value needs to increase tenfold, and self sacrifice for the owner is a must for this kind of exercise.  Its not all about your current year anymore, but your long term future, and future sales opportunity.  Think of it as a potential pension plan?  Investment for the house by the sea, whatever your dream future this is your opportunity to make it a reality.

 


 

 

 

balance sheet

This blog is intended for information purposes only and is only advice from past experience, you may have other suggestions of your own. It is not intended to be used to make all of your business decisions but as a guide only.

Top 10 Tips To Running Your Own Business

The Idea

Put a lot of energy into your business idea

Things to think about

Is my business a new start up
Have I bought the goodwill of an existing business
How am I going to turn it from an idea to a real working business
What type of business is it.
How am I to market the business
Do I have the necessary skills to make it work
Do I need the help of others
Do I need premises or can I work from home
How saturated is my market, how can I stand out from the crowd
Low cost price/versus high volume
High cost price/versus low volume
Services/Product mix
Costings of the service/product

Your USP

Unique Selling Point

Why should a potential customer buy from you?

Put together a plan detailing your USP and start promoting this from day one. This can change over a period of time as your business develops.

Think about your branding at this stage. You want to be familiar make it stand out.

Put together a business plan

I spend a lot of time mentioning putting together a business plan. It will focus the mind and highlight any potential issues you make have to face and overcome. The financials and the competition being the main parts of the plan. Spend a lot of time on these and you will have a well thought out plan ahead for you to work to.

Soletrader, Partnership or Limited

Tax relief available for Limited, but increased paperwork. Decide your status at the beginning of the life of the business. It can change at a later stage as it needs to.

The Cashflow

In the early days you will find yourself paying out and not seeing the instant reward for a period of time. Put this together with open eyes. The Sales income may be slow to start off with.

Put together a simple cashflow and complete with actuals month on month, and always roll it ahead. You can see instantly where your surplus/deficit cashflow is.

Goal Setting or KPI’s

Set yourself some goals to achieve in year 1, 2 and 3.

Sales targets
Gross margin
Net profit
Sales enquiries/website traffic
Segmentation i.e. sales types split up by category versus margin from each type

Whatever you decide to choose, keep this in both numerical format and graphical format and compare month on month, year on year. You can see instantly that you either are going the right way, or need to take action to get back on track.

The Competition

Always stay one step ahead of the competition

Review key words on the web
Price testing of the market
USP
Value for money
Unique product/service

Find out what the competition are doing and stay up to date. Look at both the smaller companies (they tend to grow) and the larger companies. (they may have a bigger marketing budget) you can learn from them. They were small once.

Your Customer

Know your market inside out. This needs to be specific, not too general.

The demographics. Is your business local or can it be national or international.
Age group, gender
Financial budget of the customer you are targeting
Seasonality

By knowing your customer you can sell to them better.

Get a website

Not all businesses need a website but most need a web presence of some kind. Look into your competition if they have a website then you need one too.

There are many low cost examples to start off with, and as you get bigger this can be something you can develop over time.

Accountant

Keep your accounts in good order and you will always know where you are financially. It is key to know you’re making a profit and staying that way.

Taking action if your finances need a pick me up.

Use your Accountant as someone who you can telephone from time to time to discuss your strategy. It should be a two way street.

It’s not just about preparing tax returns and accounts, this should be part of your strategy.

This blog is intended for information purposes only and is only advice from past experience, you may have other suggestions of your own. It is not intended to be used to make all of your business decisions but as a guide only.

How to beat the recession blues

Planning your business through tough commercial times will be more of a necessity than ever, sales may be not as productive as before, cashflow may be tight. See my 6 point tips that will see you through. These methods work time and time again, so give them a try.

Look at your product or service

If sales are not converting as quickly as they were before look at what added value you can offer as part of that service to make it more appealing to your target market.

What is your Unique Selling Point?

What is your client retention? Its cheaper and easier to have a customer returning to you time after time, than them coming once, then never returning. This could be a project in itself.

First you need to know who are you are targeting.

Look at your demographics, ie

Selling direct to the general public
Age groups
Location is the product or service local or national, global
Gender
Business to business
Small businesses
Large business
Specific industry’s

The Competition

How is your product different, what are the added features
Separate yourself from everyone else
Are you cheaper
Are you local
Can you incorporate postage costs within your price
Take a look at the large corporations, they would have seen plenty of tough times, how do they get through the recession. Learn from the experts.

In times of recession price sensitivity and quality are always a priority for your customers.

Pricing Structure

How do you cost your product or service.
For example use the BCG Share Growth Model as below. This will help you assess which products are making you profit, which are not.

Split your costs and services into 4 categories, see the picture example.

Stars
Products that are high volume and high margin. These may be products that have always been good sellers, and a favourite with your customer.

Question Marks
Products that are low volume and high margin. These might be a niche market product that only appeals to a certain audience.

Cash Cows

High volume products, low margin. Low value products, but you sell a lot of them.

Dogs
Low volume and low margin. Products that don’t really have market, obsolete stock etc.

cross accounting service


Costs
The cost of sale

Who do you buy your materials from

If you deal with a retailer, maybe its time to negotiate.

Look at your high volume products, can you buy direct from the wholesaler, you will save at least 30% doing just this. Look at your stock levels, even holding stock for three months. Look at the possibility of the savings versus cash outflow in holding stock. It might work out a better option.


Overheads
Assess every cost you have from the every overhead from rent, heating, electricity, the phone bill. Even the stationery bill. Get your negotiating skills at the ready. If your struggling, they may be too. They need your business.

Look at local businesses and see what they can offer, you’ll be helping your community and possibly reduce your logistics costs too.

The wages bill, it is a high cost for a business, make sure you get the maximum out of your investment. Don’t see your staff as just employees, they are an investment in your future. Look at training, how can they add value to your product or service.


Look at your car and fuel costs, don’t make unnecessary travelling journeys.

Don’t spend on unnecessary costs, keep the frills for the better times.

Cashflow
Look at all ways of protecting your cashflow. Plan ahead put together cashflow plans, even a simple one will show you ahead of time when you are going to need to fill the gap. Is your business seasonal. If you see a drop in cash, start saving for it now. Don’t leave it to the deadline date as you wont have given yourself enough time to build up your cash reserves.


Investment in capital expenditure, or taking on staff, assess a long term plan the viability of this, before you spend. Growth is lovely, but staying open is more important.

Look at ways to ease the cashflow burden. Look at your weekly, monthly overhead costs. Ie Ask yourself this question “What do I need to sell to cover my overheads.”

Gain credit from your suppliers.
Look at an overdraft facility with the bank, yes they charge, but you never know when you might need the cushion.

Look into leasing your fixed assets, this will also help with the cashflow.
Pay your VAT, PAYE monthly, at least it will reduce large amounts of cash going out of the bank at three monthly intervals. Ie spread the cost.

Look at your long term, possibly obsolete stock, sell to a scrap merchant, hold a sale. It costs money to sit in your warehouse.

Diversify
If you are not hitting the right note with your customer, maybe think about other sources of income. Look at the market place, what market isn’t saturated yet.

What services are connected with your products, its all about adding value to what you do already.

If your business is seasonal, what can you do with that time to keep the cash coming in. If its routine every year, make this year different.

This blog is intended for information purposes only and is only advice from past experience, you may have other suggestions of your own. It is not intended to be used to make all of your business decisions but as a guide only.

The Business Plan

9 April 2014

This blog is intended to explain the full potential of your business plan.

We have just updated our Business Plan and wanted to share some insights as to why these are important for the growth and success of your business.

You may have put one together when you started your business and it is now collecting dust in the drawer, next to the filing cabinet.

How about if we told you it can be adapted to be used as a positive tool to be developed as your business develops.

You maybe three years into your business, you have changed both as a person, and as a business in that timeframe. What was important three years ago, may not be so important, you may have other ideas, now you’ve dipped your toes into the world of entrepreneurship.

 

Why Do This In The First Place?

To focus on specific goals you wish to achieve, have something to aim for.

To take on a planned approach to your daily routine. The successful companies plan everything.

To know your customer better 

To know your competitors better 

To work on your threats and weaknesses . Stand out from the crowd.

 

Lets break it down.

 

Your Mission Statement

What do you want to be?

What do you want your business to be?

What is your Unique Selling Point, what is your business goal all about?

Why are you doing what you are doing?

 

Update the business plan with these new inspirational ideas.

 

SWOT Analysis

You have now been in business for while. You now have experience with what you are doing. You may have made some mistakes along the way, but have learnt from them using that knowledge to better use.

The SWOT analysis is all about where you are today, and how you compare with your expectations and more importantly against the competition.

 

Strengths - you have first-hand experience of running a business. What have you gained from your time doing it.

Weaknesses – you listed these in your first business plan, did you manage to eliminate some. Have you gained new ones?

Opportunities – No matter how big or small your business is there are always opportunities to promote and sell your product. Use your contacts you have now built up. They may be able to put some work your way. Give you access to that contract you’ve been chasing. Its not necessarily what you know, its who you know.

Threats – Whether you own the local shop down the road, or run a large corporation.

 

Three main threats to your business survival. The economic environment, cashflow and the competition. Embrace and learn all you can about them, be one step ahead.

 

The Products Or Services You Offer

What services or products do you offer ?

What is your Unique Selling Point ?

How saturated is the market place ?

How big is your market, what is your potential piece of the pie?

Is it local area or a global market ?

Can you make a profit from what you are doing?

 

The Marketing Strategy

How am I visible to the market place 

Website development 

Online presence 

Advertising in the local press 

The Directories 

Word of mouth 

Business contacts 

Referrals 

 

Looking at the competition and your customer base, the target market. This should be taking up the main part of your business plan Your strengths and weaknesses against the competition Your target market

How your marketing campaign has been working so far, track what works and what doesn’t. Some Number Work Set yourself a detailed budget and compare to actual figures Put together a cashflow statement.

Whatever youre doing always keep an eye on the cash and profitability.

Check and triple check your costings.

 

Nicola Cross 9 April 2014

 

 

 

 

This blog is intended for information purposes only and is only advice from past experience, you may have other suggestions of your own. It is not intended to be used to make all of your business decisions but as a guide only.

How Graphs Can Be Used For Your Business

Graphs can be used by Financial and Non Financial managers in a variety of ways.

Sales

Sales Managers have targets that are set for them by the company they work for.  They can track their sales in a variety of ways.

Our example shows Sales split by category/or segment and shown against budget. Targets that were set at the beginning of the year.

This graph also tells you the most popular and productive products on sale.
You can take this further and look at the margins of each product category, you might not sell a lot of something but if it returns a higher margin/profit rate, you don’t have to sell as many to get the same profit figures. There may also be seasonality in that product line.

Ie in hot weather a newsagent may sell a lot more drinks than bars of chocolate.
In cold weather the icecream freezer might go untouched. Easter, Half Term, Christmas. You would tailor your sales targets to match demand.

Apply this method to your particular product line.

 

Cashflow

You might want to set yourself a target bank balance for you to meet your overheads and make a profit.

The graph will show against budget whether you are meeting that goal.

It also gives indication of the business behaviour, see our example the graph shows above the line at first, then dips over February to April then comes back up.  Back into the target position and above.

If the graph had shown erratic it would give an indication of how well the manager is managing the business. In a planned approach, or finger in the air approach.

Gross Profit

This is a key figure in your accounts, it indicates whether you have made enough sales to now cover your overheads and make a profit.

Our graph shows a rise and then a sharp dip in May, this could be down to several factors.  The Sales themselves were generally low that month, an error in charging the right selling price for a new product line, an operational issue.

If you see a dip in any of these things, look for the reason, if easily explained, you could be putting action in to put yourself back on track.  Also look out for high peaks, these should be explainable.  ie a new contract, timing issues, seasonality, or it could be an error.

This blog is intended for information purposes only and is only advice from past experience, you may have other suggestions of your own.  It is not intended to be used to make all of your business decisions but as a guide only.