Seven Ways to Keep Your Business Sustainable & Good To Grow

Quick Assessment of your Survival Skil l s Have you got what it t akes t o survive in t ough t imes? Is dropping your prices your first course of action when sales begin to slow? Unless you can come up with several other options ... other than dropping your prices you?re headed for trouble. With 18 years working with 18,000 Small to Medium Enterprises, through the good times and bad, we can tell you from experience ... t his is not t he way t o go. You need another plan, a more effective strategy to hold out against your competitors in a tough market. If you?re not working on your strategy right now ... you might just be leaving it too late. There are several essential factors that will determine your ability to survive the downturn: 1. Know what these factors are 2. Know how to measure them 3. Know how to interpret the numbers and help make the decisions required for survival This is your guide to understanding these critical factors. Your guide to the steps needed to develop a Survival Strategy. It?s written in plain English and there?s no accounting jargon. The worksheets will make your numbers easy to understand. Then if you still find you need assistance, you can speak to your local CFO On-Call at NO charge. So what are t he 7 ways t o keep your business sust ainabl e? 1 1 businessnumbersmadeeasy.com
Quick Assessment of your Survival Skil l s Have you got what it t akes t o survive in t ough t imes  Is dropping  your pri...
7 St eps t o a Sust ainabl e Business St ep 1 DON?T PANIC ? If you start now, you?ve got a head-start on your competition St ep 2 WHAT ARE YOUR TRUE COSTS ? Have you thought of everything? Take the Costing Challenge to find out! St ep 3 PROFIT & REVENUE - Find out where you are REALLY making money (It might not be where you think!) St ep 4 NARROW YOUR FOCUS ? Survival in a tough market means going back to basics St ep 5 CASHFLOW ? The secret to keeping the life blood of your business flowing St ep 6 BORROWING ? How to make your Bank Manager smile St ep 7 GET BACK TO DOING WHAT YOU LOVE ? You?re good to grow! 1 2 businessnumbersmadeeasy.com
7 St eps t o a Sust ainabl e Business St ep 1 DON T PANIC   If you start now, you ve got a head-start on your competition ...
St ep 1- Don?t Panic! Why this is Crucial to your Survival! 1. You Cal l t he Shot s (You Can Make a Difference) Deciding to take action in response to a crisis puts you back in control of the situation. 2. You?l l Make Good Decisions (Clarity brings Creativity) Panic won?t help you make the clear-headed decisions you want to make right now. 3. You?re t he Leader (Don?t Panic the Herd) Your staff will be looking to you for leadership ? show them (through your words and actions) that you?ve got a plan (or are at least working on one) and they?ll become your greatest asset in surviving and thriving through tough times. 1 3 businessnumbersmadeeasy.com
St ep 1- Don t Panic  Why this is Crucial to your Survival  1. You Cal l t he Shot s  You Can Make a Difference  Deciding ...
Take Rat ional Act ion Now!!! Certainly easier said than done, but there are people relying on you to make good decisions about their future as well as your own. Predict ing t he unpredict abl e? Few economic experts seem to agree on how things will pan out. The best you can do do is make your business as bullet-proof as possible. If you sit and wait it may too late to act? Stay ahead of the curve and your competition. Get back your sense of control by Taking Rational Action Now while the future is still uncertain. Does your business f it eit her of t hese cat egories? - You?ve been in business less than 5 years or you?re in an industry that everyone is saying will suffer with the slowdown and you?re not 100% sure if you?ve got a heal t hy business? - You?ve been in business for years ... and you?ve seen a recession come and go. Whichever, working through the action items will show you where things need improvement and where you?re already doing a great job. 1 4 businessnumbersmadeeasy.com
Take Rat ional Act ion Now    Certainly easier said than done, but there are people relying on you to make good decisions ...
St ep 2 ? What Are Your True Cost s? Quick Quest ion - How do you decide what t o charge f or your product s or services? Pricing is one of the most complex areas of running a business. It?s also where business owners typically spend the least amount of time. Many business owners fail to understand the true costs of producing and selling their products ... or the true cost of delivering their services. Using t hese Simpl e Pricing Guidel ines wil l hel p avoid t he Pit f al l s. - Determine the cost of delivery of the product or service to customers excluding overheads. - Know your Overheads so that you can work out your ?Break-even' situation and how much you need to sell. - Decide how much profit you want and calculate this into the Price. - Know your Margin and report on it regularly to ensure it is not being eroded by increased costs. - Know your customer satisfaction levels. Dissatisfied customers won't pay premium prices. - Regularly review prices. Make small increases to cover increased costs. It is much easier to make small regular price increases at intervals throughout the year ... than one large increase say just once a year. 1 6 businessnumbersmadeeasy.com
St ep 2   What Are Your True Cost s  Quick Quest ion - How do you decide what t o charge f or your product s or services  ...
The Cost ing Chal l enge Here?s a Simpl e Exampl e t hat shows t he ?True Cost s?of running a business... How a Transport Company with 10 Trucks wastes $120,000 a year: - - - - In addition to being on the road, the Drivers need to complete their paperwork in work hours. The Business Owner charges out their Driver?s billable time. Let?s say $100 per Hour. How much time does each staff member take to complete their paperwork? 15 minutes per Job If the time spent completing paperwork has not been included as billable hours to a client ? that?s $25 per Job not charged out. With 10 trucks completing on average 2 Jobs per day ? That?s $500 per day not being charged out 48 weeks = $120,000 per year! The company could employ an Administration Assistant to complete all of the driver?s paperwork for around $45,000 per year. Making a $75,000 Saving! The question to ask here is: Are you sel l ing al l t he hours you are paying your st af f f or? Write down everything you can think of that?s a cost to selling your product or service. 1 7 businessnumbersmadeeasy.com
The Cost ing Chal l enge Here s a Simpl e Exampl e t hat shows t he  True Cost s of running a business... How a Transport ...
St ep 3 - Prof it & Revenue Which one is driving your Business? Considering Profit & Revenue in the context of an uncertain economy, it stands to reason that Prof it needs t o be t he driving f orce in your business. The important point to realise in relation to Profit, is that every dol l ar you save is a dol l ar st raight ont o t he bot t om l ine. Whereas every dollar of extra Revenue (sales) may only be a matter of cents onto the bottom line, as a sal e carries wit h it direct cost s and overheads. We?re not suggesting you shouldn?t be working on Revenue Growth, but if you?re not making much in the way of profit right now, focusing on growing the Revenue side of your business, will only put further strain on your cashflow. With business borrowing currently being restricted ? increasing your Profit first will allow for sustainable Revenue growth. Finding the answers to these 2 questions will put you in the powerful position of knowing where to focus your energies for maximum impact, today! 1 8 businessnumbersmadeeasy.com
St ep 3 - Prof it   Revenue Which one is driving your Business  Considering Profit   Revenue in the context of an uncertai...
Increase Prof it - How t o Col l ect t he Inf ormat ion YOU Need This is much easier t han you t hink! There?s 3 Questions you?ll need to ask, your Profit & Loss Statement is where to find the Answers. 1. What is our Revenue this past year? 2. What is our Cost of Goods Sold/ Direct Costs? 3. What are our Overheads? Making savings in your Cost of Goods Sol d/ Direct Cost s and Overheads will directly lead to an increase in profits. No hasty or rash decisions required here ? just go line-by-line through your Profit & Loss Statement and find where savings can be made. Next up ... How t o Ident if y Savings BONUS MATERIAL: To see how your business is performing in relation to other businesses in your industry there are Industry Benchmarks available from your nearest CFO On-Call 1 9 businessnumbersmadeeasy.com
Increase Prof it - How t o Col l ect t he Inf ormat ion YOU Need This is much easier t han you t hink  There s 3 Questions...
Increase Prof it s ? How t o Ident if y Savings Cost of Goods Sol d/ Direct Cost s What t ypes of Expenses are cl assif ied as Cost of Goods Sol d/ Direct Cost s? - Purchase of stock to sell Movement in stock held Freight costs to get goods into and out of stock Labour costs relating to production of a service or product Importing costs e.g. duties etc Discounts given Stock adjustments/ wastage Purchase returns and allowances Raw materials Manufacturing costs Packaging How t o get Cost of Goods Sol d/ Direct Cost s under Cont rol 1. Look at what you are Buying - i.e. products and services and spend some time investigating and negotiating better deals and more efficient ways of delivering. One example is a business that delivers goods to customers weekly. They managed to agree with most of their customers to drop back to fortnightly deliveries ? a 50% cut in one of their major costs! Think laterally about better ways to achieve the outcome. 2. Don?t underestimate your value as a Customer- never be afraid to shop around for other suppliers. If you are a good customer they will be bending over backwards to supply you at the right price. 1 10 businessnumbersmadeeasy.com
Increase Prof it s   How t o Ident if y Savings Cost of Goods Sol d  Direct Cost s What t ypes of Expenses are cl assif ie...
Increase Prof it s ? How t o Ident if y Savings Overheads This is an area where you can make massive savings. Do a review of all overheads and ask yourself these questions: - Why am I spending this and what ?value?does it deliver onto the bottom line? Should I cut it out? - How could I do this differently to achieve a similar result? - Who else could deliver this product or service and how much would they charge? 1 11 businessnumbersmadeeasy.com
Increase Prof it s   How t o Ident if y Savings Overheads This is an area where you can make massive savings. Do a review ...
St ep 4 - Narrow Your Focus ? It ?s Time t o Take Act ion Your second Act ion It ems were: 1. Which are your most Profitable Products or Services? 2. Which are your most Profitable Customers? Now you need to Take Act ion based on what you?ve discovered. The 80/ 20 Rul e ? 20% of your cust omers, product s or services wil l provide 80% of your business. You?ve looked at what you?re selling and to whom. You?ve determined which products, services and customers are making money and which aren?t. If you want to maximise profit, you?ll need to grow the profitable lines and customers. Concentrate on the customers who are your most profitable and products and services that provide 80% of your profits. You may need to sack some cust omers ... or discont inue some product l ines or services ... in order to focus on the ones that are really making you money. This is not t he t ime t o have cashf l ow t ied up with slow moving product lines ... or services that are expensive to deliver ... or customers who are slow to pay. Get Back t o Basics! If you?ve grown your business in a direction that?s no longer viable, correct your path now to focus on your strength. This will f ort if y your business t o weat her t he st orm t hat may l ie ahead. Do you need help deciding your most profitable customers, products or services? A FREE consultation with a CFO On-Call will identify the strengths & weaknesses in your business. Call 1300 36 24 36 (Aust) or 0800 180 400 (NZ) 1 12 businessnumbersmadeeasy.com
St ep 4 - Narrow Your Focus   It  s Time t o Take Act ion Your second Act ion It ems were  1. Which are your most Profitab...
St ep 5 - The Secret s t o Managing Cashf l ow There are 3 Things you can do t oday to improve your cashflow. Here?s t he Secret ... Your precious cashflow is more than likely being held up in one of t hree pl aces: 1. Your Debtors/ Customers ? are your customers dragging out their payment terms? Your debt collection strategy may need a review to get your cashflow moving again. 2. Your Suppliers ? have a strategy in place to ensure you take advantage of every day of credit available without straying from your terms. This will allow you to keep the money in your bank account for longer. Negotiate better terms with suppliers or talk to an expert about your options. 3. Your Stock on Hand or Work in Progress ? look for efficiencies in your company?s ordering system and job completion procedures. Example - invoice jobs on completion not at month end ? or introduce progress payments. Consider installing a Job Management or Stock Management System to ensure purchasing and work in progress have set parameters that can be easily interpreted and managed. Next Up... Cashf l ow Worksheet s The next few pages will help you understand where your current cashflow has gone astray.) 1 13 businessnumbersmadeeasy.com
St ep 5 - The Secret s t o Managing Cashf l ow There are 3 Things you can do t oday to improve your cashflow. Here s t he ...
Cashf l ow Worksheet 1. Cal cul at ing Average Days Receivabl e This is the average number of days it takes your customers to pay you. Compare this to your stated terms of trade. Exampl e: Accounts Receivable: $510,000 Revenue: $3,200,000 Time Period: 365 days 510,000 / 3,200,000 x 365 = 58 1 14 businessnumbersmadeeasy.com
Cashf l ow Worksheet 1. Cal cul at ing Average Days Receivabl e This is the average number of days it takes your customers...
2. Cal cul at ing Average Days Payabl e This is the average number of days it takes you to pay your suppliers. Are you paying too soon, and not taking advantage of every day of credit in your trading terms? Example: Accounts Payable: $150,000 Direct Costs: $1,900,000 Time Period: 365 days 150,000 / 1,900,000 x 365 = 28 1 15 businessnumbersmadeeasy.com
2. Cal cul at ing Average Days Payabl e This is the average number of days it takes you to pay your suppliers. Are you pay...
St ock & Work in Progress Worksheet 3. Cal cul at ing Average Invent ory Days This is the average number of days stock sits on the shelf or materials & labour are tied up on WIP. Think of stock as $100 notes stacked up on the floor. Example: Stock on Hand/ WIP: $360,000 Direct Costs: $1,900,000 Time Period: 365 days 360,000 / 1,900,000 x 365 = 69 Taking steps to reduce your Average Days Receivables and Average Inventory Days or Work in Progress Days can have a huge impact on your Cashflow. Next up we?ll show you how to use these calculations to show the number of days on average your money is not in your bank account . CFO On-Cal l can act ual l y show you how much money woul d be back in your bank account if you make changes t o any of t hese numbers. 1 16 businessnumbersmadeeasy.com
St ock   Work in Progress Worksheet 3. Cal cul at ing Average Invent ory Days This is the average number of days stock sit...
Cal cul at ing t he number of days money isn?t in your Bank Account 1 17 businessnumbersmadeeasy.com
Cal cul at ing t he number of days money isn t in your Bank Account  1 17  businessnumbersmadeeasy.com
Is it now cl ear exact l y where your cash is? If you know where your cash is there?s No Need t o Panic, you just needto improve your methods for getting it back into your bank account. If you?ve not got enough information in your accounting system to complete the previous Cashflow Calculations then there?s also No Need to Panic. Be aware of the time lag between you paying for goods and your customers paying you. This will show you where your efforts need to be focused for survival, and then it?s onto sustainable growth once you?ve got your profitability sorted out. Go back to Page 13 for three simple tactics for Managing Cashflow. If you?d l ike t o l earn more, downl oad our CashFl ow eBook f rom www.CFOonCal l .com.au/ how-t o-cont rol -your-business-cashf l ow 1 18 businessnumbersmadeeasy.com
Is it now cl ear exact l y where your cash is  If you know where your cash is there s No Need t o Panic, you just needto i...
St ep 6 - Borrowing t o Grow (Is it necessary?) If you?re considering Borrowing from the Bank while our economy is uncertain - you?re in reality going to need to prove your ability to pay the money back. You?ll need Budgets, Recent Financials and Forecasts. Looking at your ability to unlock cash from within your business may be a much simpler and ultimately more profitable exercise. Firstly, you?ll know EXACTLY where you stand financially ? an incredibly empowering position to be in. Secondly, you?ll know any decision you make is based on the facts rather than wishful thinking - it?s not a good time to be taking big risks or going off on tangents with your business. Focus on your profit. Finally, it?s important to realise in relation to cost savings every dollar saved is a dollar straight onto the bottom line, whereas every dollar of extra sales (revenue) may only contribute a matter of cents onto the Bottom Line, once direct costs and overheads are attributed. If you?re borrowing just t o sel l more wit hout working on your prof it abil it y you may be headed f or t roubl e! You?ve st il l got t o pay it back in an uncert ain economy. 1 19 businessnumbersmadeeasy.com
St ep 6 - Borrowing t o Grow  Is it necessary   If you re considering Borrowing from the Bank while our economy is uncerta...
St ep 7 ? Get Back t o Doing What You Love Having taken the time to work through the numbers, you can now feel much more confident, that it?s not all doom and gloom for your business. This eBook was written to help you understand where the real financial problems lie within your business and how to identify simple ways to fix them. You can be sure that business owners like yourself, who understand the importance of having a system of solid financial management, will be the businesses to survive the uncertainty ahead. Not only will you survive; you and others who apply these principles, will be the fortunate business owners set for sustainable growth. Now you can get back t o doing what you l ove. You?re Good t o Grow! 1 20 businessnumbersmadeeasy.com
St ep 7   Get Back t o Doing What You Love Having taken the time to work through the numbers, you can now feel much more c...
CFO On-Cal l ? How can one hel p you? As a business owner, you may not need a full-time CFO. But you almost certainly DO need more expertise than you get from an in-house bookkeeper/ number cruncher, and more help and ongoing advice than an annual trip to your accountant. So a CFO On-Call advisor can become your Chief Financial Officer ? but part-time. They can help with internal financial control and direction for your business. That could be every now and then, once a week or once a month. It?s up to you. You can have al l t he benef it s of your own CFO, f or a f ract ion of t he cost of hiring someone f ul l -t ime! They will be always available, face to face or on-line, to help plan strategic direction with you, discuss new ideas ... and be your right-hand financial guru ... whenever you need help. Best of all, they bring ?big company?experience to your business. All CFO On-Call people are qualified management accountants from bigger businesses, but unlike most tax accountants, they?ve worked as senior financial controllers in leading companies and know exactly how to improve financial performance. See www.cfooncall.com.au or www.cfoncall.co.nz To enquire call: 1300 36 24 36 (AUS) or 0800 180 400 (NZ) 1 21 businessnumbersmadeeasy.com
CFO On-Cal l   How can one hel p you  As a business owner, you may not need a full-time CFO. But you almost certainly DO n...