How are you ensuring your business is in the best shape possible?

17 Aug How are you ensuring your business is in the best shape possible?

The business landscape will always have cycles of ups and downs – the ability to respond effectively to these cycles is an important part of running a successful business. It is normal to relax and feel confident in the ups as decisions are taken more easily, and as a business owner you feel more in control. The question to keep in mind at all times though is, if your business is in the best possible shape when the cycle turns, the market tightens up and business starts to slow down.

Contrary to popular belief, there are a number of things you can do in this situation. Preparation and accurate information are your strongest and most helpful allies:

Simplify your numbers so you get a clear picture of what is going on in your business:

• Understand your total sales and total expenses as simple groups (cost of goods, total labour, operating expenses)

See what is happening to your cash and how you can improve it:

• Is your cash increasing or decreasing at the end of each month, and what is driving that
• What is happening to debtors, creditors and inventory
• Can you get access to cash rapidly (i.e. positive liquidity, is debtors plus inventory more than creditors)
• What can you do to speed up cash collection

Understand what is happening to your revenue and margins:

• Are you reducing margins to win work and is this sustainable
• What are your points of difference to maintain higher margins and how can you focus on these
• How can you protect your relationships with key customers

Establish if you need to adjust your business to ensure profitability:

• Are you generating enough margin to pay your operating costs (i.e. is your ‘engine’ greater than your ‘chassis’?)
• If not, what do you need to adjust in your ‘engine’ or ‘chassis’ to ensure you stay strong

Get help identifying what needs to be done to turn things around:

• Trends, margin percentages, Rolling 12 – get a better overall perspective and not just a look at any given month
• Are your key margins getting stronger (i.e. gross profit, operating expenses, net profit)

Get help with implementing the changes needed for better results:

• Who is helping you as you are making these important decisions
• Do you have a sounding board, or have someone to help hold you accountable to ensure your business is in the best shape possible

If you would like more information on the tools and processes involved in strengthening your business, reach out to Scott Morris from NumerEyes: [email protected]