How to survive the downturn

The current world wide economic downturn has, again, highlighted why small business owners must actively scrutinise their finances.  Many small business owners still rely on old and/or out of date information.
 
Last week, I recently met with a new client who had experienced a 25% decline in their sales.  When I asked them about their cost structure, they admitted that they had no idea and hadn’t had any financial statements prepared since 2006!!

Not only had they ignored the tax man for 3 years, but it’s also poor business practice. 
 
Recessions often provide a “wake-up call” for many business owners as it forces them to evaluate what they are doing.  In the current uncertain climate there is very little excuse for ignoring your key financial indicators. 

One efficient way to understand your business’ financial performance is to prepare a simple cash book.  For as little as $100 per month, you can generally get a book-keeper or accountant to do this for you.   
 
Understanding your current profitability, cash flow and break-even points will help you to review your spending and help you to set budgets.  This may include putting money aside for tax liabilities and owners’ drawings/salaries.

I have seen far too many small businesses suffer because their owners failed to meet their tax obligations or pay themselves.

Talk with your accountant.  They should be able to advise you how much to set aside for tax – I accept that this may reduce cash flow in the short term but it may avoid unnecessary surprises later.  Consider setting a regular amount aside in an interest bearing deposit account or use your credit card for some expenses to take advantage of the interest free periods that many credit card companies now offer.  
 
Also examine your expenditure as there may be ways to easily reduce costs too.  I have put a complete stop to anyone purchasing anything in my businesses without my express approval. 
 
This had an immediate positive impact on our stationery, printing and postage expenses.  Remember it’s your money that your employees are spending…not theirs!

I am currently consulting with a client who “shouted” their staff morning tea twice a week.  On my advice, she now buys the ingredients and asks her daughter to bake home-made muffins and she also now provides on-site coffee facilities.  She is delighted that she now saves over $700 per month from just this one simple change.  What small changes could you make?
 
But be careful…many small business owners cut back on the wrong expenses.  Marketing and sales remains an important area for many of them.  However, I have lost count of the number of clients who blatantly waste money on marketing and advertising campaigns that simply do not work.  They simply throw more money at it, hoping that the ‘phone will ring.  For more marketing tips, visit www.themarketingdude.com

Is it time that you reviewed your business finances?  Who knows…a few hours of your time may result in some pleasant surprises.

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How to improve your reading speed

What if you could TRIPLE your reading speed in under 60 minutes?

That was the question Dr Michael Masterman asked me to consider — when he sent me a review copy of his new speed reading audio course three months ago. And you won’t be surprised to hear that I didn’t believe it!

Now, I’ve always avoided learning how to speed read.

Why? Because I always believed it’d take hours of training to really “work properly.” And I’d heard a couple of horror stories too. (One very well-known six-CD course essentially suggests listening to fast music while reading. Now that’s incredibly draining – and not exactly suited to a slow-paced romance!)

Michael promised I would literally triple my reading speed in well under an hour (without fast music or other gimmicks!) — and said that his audio course included tests to prove it. He also said I’d be able to maintain that super-fast reading speed, even weeks later.

I took the course. It worked. And I’m STILL reading at lightening speeds!

That’s exactly why I wanted to write and tell you about Michael’s “Speed Reading Secret” course today!

But don’t listen to me chat about it. If you want to blast through e-mail messages, Web pages, revision, books or reports (and pick up an amazing new vocabulary along the way), then check out his site:

The course includes tests, so you can literally see just how well you’ve improved. And if you don’t improve enough, claim your money back through his guarantee!

Michael predicts the average person could save one day a week following his advice. I think he’s probably right.

Enjoy!

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How to promote your business

As you know, customers are the lifeblood of your business. Without them, your business doesn’t stand a chance at success – and will crash and burn along with the many other small businesses that don’t survive their first five years.  No matter how much time and money you spend on your marketing efforts, you will only succeed if you target your advertising to the right audience and pay attention to the results.

Broadening the scope of your efforts will enable you to reach unlimited numbers of potential clients.  The key to successfully promoting your business is simple:

1. Establish your target market
2. Learn your client’s most intimate desires in order to find customers, bring them in to your business, and deliver exactly what they need (and keep them coming back for more!)
3. Stock your marketing arsenal with a variety of powerful advertising tools
4. Track your progress to determine what works for your business – and don’t be afraid to change your strategy as necessary

Once you’ve developed your marketing strategy, you need to ensure that your message cuts through the clutter and speaks to your customer. This is where your Unique Selling Proposition (USP) comes in.

Your USP should stand out from the crowd – and capture the essence of why your product or service is superior to the competitions’.  If you have already developed a USP for your company, take a moment today to review it.

Is your USP powerful enough to have customers queuing up at your door?

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You Don’t have to Have all of the Answers; It is okay to Seek Help Once in a While

If you are too proud to ask for help in your business, you are missing out on many valuable learning opportunities. Mentoring is an essential tool to utilise in business. Mentors, business associates, friends and family can all provide valuable insight to assist you in your business success. Mentoring is one of the best sources for quality information and business wisdom on an ongoing basis and is simple to arrange.

Choosing a mentor is an important decision. Start by searching for someone in your business field that is currently in the place where you would like your business to be. Ask for a small amount of their time on a weekly or monthly basis, either in person or via a teleconference. Mentors are generally business owners who have more experience than you, who have achieved a higher level of success and who can become a trusted advisor to you and your business; and, their time is often free.

As a business owner, you are generally on your own. No more bosses to ask advice from and often few employees to bounce your ideas off of. Every business owner needs to have a great sounding board and sometimes they need emotional support throughout their business journey. Read my article, Why it Pays to Have a Network of Advisors, for more information about choosing the best mentor.

Learning from the business mistakes that your mentor may have made may help you avoid those same mistakes while you are growing your business. A mentor’s perspective and past experiences will help you to propel forward quicker in your business strategy.

Business mentors can also offer you access to an extended social network, offering you and your business access to senior decision makers to help you along. People like to help other people, and mentoring is a primary way for successful business owners to give back to the business community.

Mentors provide you with a no pressure and no ulterior motive relationship. This level of openness fosters better communication and a comfortable learning environment. The establishment of trust is something that typically grows into a long term trusted business relationship.

Don’t be afraid or too proud to ask for help in business. Mentors are a tremendous resource for any business owner, at any stage and will help you go further than you would be able to go on your own. Seek out a mentor to begin moving your business forward.

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Value your time as you can bet your customers won’t

Owning your own small business isn’t just a normal job, its 15 jobs or more all at once. You have to be your own PR specialist, marketing manager, bookkeeper, and receptionist in addition to the overseeing the primary product or service of your business – be it website design, marketing consulting, or pottery production.

It is highly likely that you work 16 hours a day and only have time for the bare necessities. Maybe you even miss dinner every other day and hardly have time for your family.

Does owning your own business really have to be this way? The answer is no, but you need to learn how to better manage your time. If you don’t start valuing your time, who will? Your customers sure won’t. They only see and care about the final product, not what goes on behind the scenes.

Time management is vital to your work-life balance, but it can also lead to higher operating efficiencies for your business.

A very important step in better managing your time is delegation. You need to learn to let go of some of the tasks you are currently in charge of and allow other people to take care of them for you. Many small business owners refuse to delegate their tasks, their reasoning being that other people won’t do as good a job or that it would waste too much time showing another person how to do the job right.

These are normally just excuses because the truth is, most of them are afraid to lose control over the tasks. They fail to realise that no matter who is actually doing the job, they still have the final say over it.

You may also be hesitant to delegate because you’re concerned that the costs associated with it will be too high. That may or may not be the case depending on how you approach it. If you spend enough time researching who the best and most cost efficient provider is, chances are you will not incur the high costs you fear.

Also, remember that delegating would allow you to concentrate and spend more time on the jobs that you are better and more efficient in. Finally, delegating doesn’t have to mean that the quality of your tasks will suffer. Sometimes, if the provider you choose is a specialist in the job, he or she may be able to do an even better job than you could ever have done.

For more information on how to better manage your business have a look at my article Leverage your Time and Use it More Productively or go to to www.secretstobettertimemanagement.com.

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Improve your business with key performance indicators (KPIs)

For those of you who are constantly looking for ways to better manage and improve your business, key performance indicators could prove to be a good solution. Key performance indicators, also known as KPI’s, are financial and non-financial measurements that help a business understand how much progress it has made in achieving its goals. Before KPI’s are established, however, a business must clearly establish its mission, goals, and stakeholders.

Key performance indicators will vary from organisation to organisation and will depend on what the overall goals of the organisation are. For example, a call centre whose goal is to provide the best possible customer service to its clients may use “the number of inbound calls that are answered in less than 30 seconds” as a KPI to measure progress towards that particular goal. A college whose goal is to produce highly-qualified graduates may use “the number of students who find a corporate job within 1 month after graduation” as a KPI. A business whose goal is to achieve a high level of customer satisfaction with their product may use “the percentage of sales that are generated by return customers” as a KPI.

For key performance indicators to be effective indicators of an organisation’s progress, they must be specific, quantifiable, and achievable. KPI’s such as “To be the most well-liked company” are useless because there is no concrete way to measure that. Likewise, a KPI such as “gaining new customers” is too vague because there is no way to differentiate between old and new customers. It really is a classic case of “what you can’t measure, you can’t manage”.

Because key performance indicators are measurements that are used over a longer term, the way in which they are measured should not be changed too often, if at all. They have to be measured in the same way over their life span. In addition, very precise targets for the KPI’s must be set that can be easily understood by all parties involved in its achievement.

If the appropriate KPI’s are established in the correct manner, they can help a business track its overall health and growth meticulously. They can help to identify problems and inefficiencies quickly and will allow you to zoom in on the underlying causes with a greater clarity. For small businesses, KPI’s would be ideal in tracking net profit, sales revenue, production efficiencies, and market positions. Even if you think you have a pretty good overview of your small business, the use of KPI’s could further enhance the understanding you have of it.

If you’re interested in the subject of analysing a business’s overall health, have a look at my article called “The Top 5 Warning Sings that Your Business is Declining”.

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4 ways to reduce your costs

The little details can make a big difference in the world of business. It is more likely that a small business will experience a surge in profits due to its implementation of a series of small cost-cutting strategies rather than the acquisition of a huge new client.

Cost cutting strategies for your small business don’t have to be complicated, they just require that you pay attention to some of the more trivial aspects of your business.

Here are some ways for you to reduce the costs of running your business and increasing your income:

1. Buy in Bulk
Identify the items that your business needs and uses on a continuous basis. A good way to do this is to observe which of your office supplies you always seem to be running out of.

Shop around amongst warehouses, wholesalers, or even mail order wholesalers to see which seller can provide you with the most attractive wholesale price for your supplies. When you buy large amounts of supplies at once, you will usually get much larger discounts.

2. Borrowing vs. Renting
If there is a specific piece of machinery or equipment that your business only needs periodically or for a short period of time, it would probably be a good idea to rent it instead of buying it. You may rent the equipment from a private entity or a rent-it-all store. Again, make sure you do some comparisons to see which provider offers the most economic prices.

3. Saving on business equipment
Does your business really need to have the latest in equipment, software, or technology gadgets? If not, why don’t you consider buying an older model? Because technology moves at such a fast pace, so many new products are flooded into the market every year. That doesn’t mean last year’s model isn’t any good. You can save a lot of money by buying slightly outdated equipment that serves its purpose more than adequately.

4. Pay your credit card bills on time
Most credit card companies will charge you a hefty late fee if you don’t pay your debts soon after the monthly bill arrives. Sometimes, these charges can be ridiculously high. Pay attention to when your bill comes and make sure to pay it soon after to avoid these unnecessary costs.

For more information on how to successfully run a small or home-based business, please see my article Proven Tips to Improve your Cash Flow.

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How to get your Bank Manager to sanction your loan application

Financial skills are one of the most important skills to master in business. You will need financing at some stage in your business; beginning, expansion, or for equipment purchases. Understanding what a lender will be looking for and being able to provide it, will improve your chances of financial success.

Financial Ability to Repay
One of the most obvious things that a lender will be interested in is the ability of you to financially repay the loan that you are requesting. Before you present your loan request, create a current list of assets, income and liabilities. Create this list for both your personal finances and your business finances; the lender will want to see both.

Include your business’ assets as well to show the progress that your business has made if you are requesting an expansion loan. Lenders will be impressed with growth.

Lenders also like to see assets that will protect them in the event of a defaulted loan and a Borrower that is organised and proactive in preparing this information will be impressive.

Expertise
A lender is often not just betting on your financial ability to repay a loan, but on you yourself. Prepare an updated resume of your business experience, successes and business skills to support your business case to the lender that you are a good risk.

Your personal presentation is a sale. Sell yourself as a reputable, honest, experienced and valuable investment for them to consider loaning money to.

Business Plan
Prepare an updated and detailed business plan showing where your business came from, where it is currently and where is headed. Include accountant prepared and audited cash statements when possible to the lender, the show detailed and realistic cash flow projections.

Lenders are going to want to see progress and momentum towards a positive business future. Include in your proposal the amount of the loan that you are requesting, what the money will be used for and the expected business success for repayment that will occur as an end result.

One of the most often overlooked factors for business owners is insurance. Lenders want insurance for loans in the event of a default. Life insurance, disability insurance, business insurance and plan to protect business partners from each other are all important factors to have prepared to show a potential lender.

Strong financial skills are essential to possess and maintain as a business owner. To read more about how to prepare for a lender presentation, read my article, “Business Loans- What a Lender is Looking For”.

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Discover 7 Common Causes of Cash Flow Problems in your Business before it is Too Late

Cash flow provides the necessary fuel to propel your small business forward. Cash flow problems can lead to an insolvent business structure and are a leading indicator of a failing business.

Here are 7 of the most common causes of cash flow problems in small business and solutions to help you avoid them:

1. Lack of Payment Term Discounts
Waiting for a customer to pay once you have delivered a product or completed a service can cost your business valuable money. Offer your customers a term discount such as 2% net 10, or 1% net 5 in order to encourage them to make their payments quicker to receive a discount.

2. Lack of Tracking
Tracking your business results is crucial to its overall success. Install tracking systems in the areas of your business where you can improve cash flow such as inventory management, supply ordering and procurement to reduce waste and improve turn around times.

3. Failure to Perform New Client Credit Checks
Ensure that your new clients have credit checks before your business ships out product to avoid an untimely payment or a payment default from a business with a poor credit history.

4. Lack of Credit Insurance
Failure to have credit insurance, especially when working with customers internationally, can cause the business to lose substantial cash flow if the customer is slow to pay or defaults. International customers are also more challenging to take financial action against. To learn more about how to handle bad business debts, read my article called 5 Ways to Handle Bad Debts.

5. Slow Product or Service Turnaround Times
Shorten the delivery times of your products or services to your customers to maximise the level of potential profit.

6. Taking Cash Instead of Credit
Change your business structure to where your only methods of payment are credit cards or online banking systems to decrease the wait time for business payments by check.

7. Failure to Leverage Factoring or Inventory Financing
Failure to leverage these financing solutions when your business is producing or manufacturing a product or service for a client, can cause the business to suffer a short term cash flow problem. Consider leveraging factoring for the customer’s order or inventory financing for the required purchase of inventory to product their product or service to help your company’s short term cash flow problem.

Learning from these 7 common cash flow mistakes and applying the relevant solutions will help your business to improve cash flow and avoid potential insolvency. For more information on how to improve your cash flow, read my article called Proven Tips to Improve your Cash Flow.

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How to Create a Compelling Vision for your Business

Your company’s vision statement is the statement of its potential and of what you want your business to become. Your vision statement should be meaningful to you and your organisation. It should be shared will all of the employees in your organisation in order to create a unified direction for everyone to move in.

Crafting a vision statement is a challenge for many business owners, so I have included several strategies in this article for you to make this process easier to complete.

Begin by describing the best possible business future for your company, using a target of 5-10 years in the future. Your written goals should be dreams, but they should be achievable dreams. Unachievable goals can create frustration for all parties involved and can cause a decrease in your organisation’s morale.

When writing your vision statement, use the present tense, speaking as if your business has already become what you are describing. Use descriptive statements describing what the business looks like, feels like, using words that describe all of a person’s senses.

Your words will be a clear written motivation for where your business organisation is headed. Your words can be as long as you would like them to be, but a shorter vision statement may be easier to remember.

Ask yourself the following questions as you craft your vision statement:
• What do you want your organisation to look like in the future?
• What is your organisation currently excelling at? How is your organisation currently competing in the market place?
• What do you currently use to judge your organisation’s effectiveness?
• What do your employees see for the company’s future? Ask for their advice.
• Visualise the end result of where you would like your business to be. Visualisation will help you choose the words to craft your vision statement.

Once you have completed your draft vision statement, summarise your thoughts into a single, powerful phrase to describe your entire vision statement. Your employees will remember this powerful single statement, and it will become a motivation tool within your organisation.

Share your vision statement with everyone that supports you and your entire organisation. It can take some time for the vision statement to become a common practice, but if regularly discussed and reviewed, your vision statement will become a part of your organisation’s culture.

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