8 Things to make you think about your business differently!
Here is a quick article to get you thinking about the new Financial Year a little bit differently and help you achieve this years business goals….
- Positive Outlook – Be positive and assume you can achieve your targets. A positive attitude is very important, as it will help you see hurdles as minor set backs or problems you can solve, rather than road blocks. With a negative outlook, you are destined to fail.
- No Apology Debt Collection – Say to yourself very loudly “I will not apologise for collecting MY money.” When your customers owe you money, it is normally because you have provided them with something first. That was the arrangement wasn’t it….. I give you something (service, product), you provide me with money. So if a customer hasn’t paid you, are they really a customer? Or have you just made a donation to a charity? Why should you feel guilty about collecting money for the work you have already done and the expenses you have already incurred? Set a program to collect the money customers owe you and stick to it. Cashflow is the life blood of your business. I can hear some people saying….. what about keeping my customers happy? In my opinion, customer service extends to the delivery of your product or service…. collection is separate and is merely an administration type function. This doesn’t mean you don’t help those that generally may require some leniency, but do it for the people you enjoy working with and have earned that right (good payers in the past). You may also offer debtor payment plans/flexibility in how people can pay, but that should be agreed at the outset. If you are still worried…. I would again remind you…. is the person a customer if they haven’t paid?
- Nice People, Good Return – Repeat after me…. “I will work with customers who are nice people and/or provide a good return (preferably both).” If they are not one of those…. why are you working with them? Review your client list at the beginning of the year, rank them based on the above. If they don’t fit, politely ask them to go elsewhere or increase your prices. If they stay, you hopefully move them into the Good Return box. If they leave, this will free up your time to attract new clients with the right qualities. See the point below.
- 80-20 Rule – 80% of your problems will come from 20% of your clients (see point above). In addition, 80% of your profit will come from 20% of your clients (it may be by number or characteristics). Find the 20% that provide you little return, but take up all your time. Politely ask them to leave.
- You can’t be everything to everyone – Most businesses spend too much time trying to be everything to everyone. This will build you a very large, but also cumbersome database of clients. Focus on clients where you have a competitive advantage or a particular expertise. Identify your “ideal” client and what characteristics they have – then target them and only them. For most businesses, this is probably what you thought they would be doing when you started….. before you got distracted by trying to be everything to everyone.
- Calculate your Hourly Rate – Add up the hours you work in the business per week and then multiply it by the weeks you work per year. Grab the profit from your business for last year and divide it by those total hours…… Are you happy with that hourly rate? Is it above minimum wage? Is it more than you pay your key employees? Does it reward you for the risk you are taking? Does it include any superannuation contributions or leave entitlements? Many small business owners will complete this task and find out it is way less than they thought (sometimes under minimum wage). So what is an acceptable hourly rate and what must you do to achieve that…. If you are unsure how to calculate the above, get your accountant to help….. that’s what we do and what we are here for. Also use your accountant to help you set budgets and KPIs to achieve those targets…. its easier and less boring than you think.
- Should you be chasing the Gold or the Gold Rush – There is so much hype these days and the media (social media in particular) are constantly promoting you “have to be on this” or “targeting this new business opportunity” or your business will fail. Business start ups in particular get caught up chasing that “new opportunity”. So to help explain my point, think about an old fashioned Gold Rush for a moment…. someone discovers gold in the old days and people from all over the world used to rush that place with picks, shovels and headlamps and start digging for gold. The hope of course was to find gold and make it rich. This is a high risk venture and for some (probably most) it didn’t pay off. However, now think about the pubs, transport, mining equipment supply stores that provided services to those hoping to strike it rich….. they were more traditional business models (so more familiar) and made a very good return on taking the miners money. So the lesson here….. you don’t need to chase the gold to make it rich….. you might be able to tag on to something related to it and it might be something you are more familiar with. Also, while there is all the hype on the “gold rush” it is often the opportunities just outside that where gaps in the market exist which you can take advantage of before the rest of the market catches up (less competition). A good recent example would be alternative/green power production. Lots of effort and talk was on solar, wind so-on. Lots of businesses popped up in this space. However, one of the businesses to benefit from this emerging market the most was lithium miners/wholesalers who were selling the lithium for the storage of that power. Solar business came and went, the mine and related industries is still there and booming off of those that survived. So when you next see a Gold Rush…. ask yourself…. should I chase the gold…. or is there something related to it in the “rush” that I can target more successfully. On the flip side but related topic is “Moth or Shiny Ball Syndrome”….. don’t let yourself get distracted by a bright light like a moth flying in the dark. A business should always look for opportunities….. but not to the detriment of the core business. Set some goals for the year, then stick to it…
- You don’t have to do it alone – Too many business owners try and do it alone. They believe their business is unique and they are saving lots of money trying to do everything themselves. This can be overbearing and affect the business owners efficiency and their positivity (see point 1). There is only so much time in a day, so the only way a business can grow is by leveraging off of others…. that is why businesses hire employees. You should think of your professionals (Accountants, Lawyers so-on) the same way…. leverage off their skills and knowledge to fast track your success.
There are of course many more, but hopefully this has got you thinking and shifted your mind set a little….. now go out there and have a great year. Remember, think positive.
Holmans Accounting and Taxation is an accounting firm located on the Sunshine Coast Qld (Noosa and Maroochydore). We specialise in Business taxation and advice, Accommodation industry clients and Self Managed Superannuation Fund services.