As the start of 2023 looms, now is the perfect time to conduct a ‘health check’ on your business to assess what is working in the business and what needs working on.
While the term health check conjures up some pretty negative thoughts for most business owners, we’re not talking about experiencing personal prodding and poking, rather our suggestion is to take a step back and review the direction of your business and your financial goals for the year ahead.
Ask yourself these questions:
Where do you see your business at the end of 2023 in terms of revenue, profit, staff numbers and business value?
If you are planning a growth spurt what marketing activities will drive the growth?
What do you plan to change from last year to achieve better financial outcomes?
As a starting point, we have identified the following five areas in your business that you could put under the microscope.
1. Business Planning & Goal Setting – Do You Have a Vision?
What is your vision for the business? There is a saying “People who aim at nothing generally hit it with tremendous accuracy”. You need to have a vision in order to know where you are going and we often tell clients starting their business that you need to ‘begin with the end in mind’.
Do you have financial goals for the year in terms of sales and profit? If you plan to grow your sales by 30% next year what marketing and business strategies do you plan to use? What tools, equipment, software and systems do you need to help you achieve those targets? It needs to be documented so you can measure and monitor your progress.
It’s attributed to Einstein that: “Insanity is doing the same thing over and over and expecting different results.” It’s the same in business, don’t just hope things will get better, identify the big impact items you need to address and create a list of actions steps. It might be the re-development of your website but identify who is responsible for each action step and set time lines for implementation. If you write down your goals and then create a list of action steps to achieve those goals you can measure and monitor your progress.
Is your website generating leads? Is it your silent salesperson open 24/7 or just an online brochure that lists the who, what and where of your business? Maybe you need to review your website and ramp up the search engine optimisation on the site. You might need to create a database of customers and start an email marketing campaign or get more regular newsletters to your customers. For others, the focus might need to be on your social media strategy or branding.
2. Forecasting your Profit and Cash in the Bank
Now that you have looked into the future, have you seen what your business needs to achieve financially? We recommend you create a cash flow budget to track the financial impact of the changes. How much will each of these strategies cost and what is the timing of the expenditure? We can help you do some financial modelling based on different prices and assumptions but it is important to quantify the financial outcomes and then measure these against actual performance. Most accounting software programs like Xero, MYOB, QuickBooks and Cashflow Manager have a budget and variance feature built in.
If your plans come to fruition you need to identify what extra resources you might need. It could mean higher levels of stock on hand and possibly more staff to handle the surge in sales. A budget helps you identify the amount of extra funding required and the timing of when you need the money. Is it time to extend the overdraft or finance a vehicle or piece of equipment by lease or chattel mortgage? In this environment you need to plan your funding needs in advance because banks don’t take too kindly to last minute funding requests.
3. Reviewing Costs is a Given But …
While most accountants will tell you to cut costs, we tend to focus on how to increase your revenue. But how do you increase revenues in your business?
Smart marketing is the short answer. Having said that, you should also look to identify any costs you might be able to prune. Start with your biggest 5 expense categories on your profit and loss statement, however, this probably includes rent and wages that might be fixed. Maybe you could save on utilities and explore a cheaper phone and internet deal. Some costs might be superfluous to your needs and maybe you could drop some subscriptions or negotiate a better pricing deal from your major suppliers.
In business, if you don’t ask you don’t receive. Business owners should be constantly reviewing their advertising and promotion costs. Are these channels working or could they be re-directed from off line methods to more effective on-line methods?
4. Don’t’ be Afraid to Increase Your Prices
If rising prices in your supply chain have pushed up your supplier’s costs then you need to think about passing them on to maintain your gross profit margins. Inflationary pressures are a fact of life and what would a 3% increase in prices do to your bottom line? Your rent and payroll costs probably both went up substantially but have you adjusted your prices accordingly? Would you lose sales by increasing your prices?
What have competitors done with their pricing in the last 12 months? Maybe it’s time to get a mystery shopper to do some ‘research’ for you. If you do increase your pricing, how do you plan to notify your customers and will you announce that prices will rise effective from February 1st, for example, so they have some advance warning and opportunity to buy at ‘old’ prices before the deadline?
5. Marketing Moves
What are you doing to get more customers? How do you plan to get your customers back more often and spend more each time?
Marketing and in particular online marketing is now a vital ingredient in any business. Have you had any feedback from customers that they had any difficulty finding information on your website? Maybe it’s time for a website facelift? Maybe your branding is old and tired and in need of a makeover, particularly if you want to appeal to younger customers.
Does your website have an opt-in box where you give away a valuable, informative e-booklet in exchange for an email address? Do you have a customer database and how often do you market to these customers? Is it time to produce a regular newsletter and special offer? Is it time to embrace social media because your target market engages with those channels? Should you start producing videos and increase your online spending at the expense of off-line media?
It is essential that you constantly measure and monitor what is working with your marketing and if you need any help with your business planning contact us today.