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Home » Categories » Business » Small Business » Is Your Business In Denial???? » Reprint Rights » Printer Friendly
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Is your business in denial? Have you asked your business this question lately? You might say "what do you mean? Who do you want me to present this question to? I am the business?" Exactly. You are the business so the real question is "Are you in denial about the health of your business?"
Certainly, you might not want to ask this question out loud. The office staff will wonder why you are talking to yourself. I say, stand in front of a mirror and speak up "Am I in denial about the health of my business?"
I believe that nine out of ten business owners will have to say YES! If I were to give you a set of business ratios and ask you to quantify those ratios about your business, the results would make you sick! They would force you to face the fact that your business may be unhealthy in one, two or maybe more areas than you care to consider.
Now the solution is not more valium. The solution is not a vacation, new car or on the other hand, wholesale firing of the entire office staff. The solution is just as the problem, a planned implementation of a recovery to profit. It didn't take one crushing blow to get you into bad shape so how do you expect one swat at the problem will solve everything?
Focused implementation of a strategic plan in 4 KEY AREAS is necessary. The 4 KEY AREAS are: Revenue Growth, Cost Control, Enhanced Profitability, and Increased Cash Flow.
I know, you know this stuff, right? Wrong you may desire these things, but you have already proven that you don't "Know" this stuff. Results speak for themselves. Somewhere you forgot to look in the mirror, make the tough decisions, stay disciplined and keep the team on track.
Let's look at the fundamentals of the 4 KEY AREAS:
Revenue Growth: Well, who wouldn't want more sales? The answer is possibly you. Maybe you don't want more sales, maybe you want better sales, maybe you want quality sales, sustainable sales, and repeatable sales. No, just more sales don't cut it. The first question is: what do you know about your sales? Where are they coming from, which product has the highest gross profit. Which sales will lead to repeat customers, which sales will lead to referrals for additional business? If you can answer these questions with the historical trends in sales for the last 12 months as well as the last 3 years, then you will have the beginnings of a strategic plan to Revenue Growth.
Cost Control: Most business owners equate cost control with cost cutting. The two are entirely different. Cost control assumes you understand the relationship between each cost of your business, how to maximize your supplier relationships, create efficiencies in the various structures of your organization as well as simply using the tool known as "sharpen the saw" by putting a magnifying glass on each expense item and clarifying that it's the correct expense at the correct cost to strategically act and react with the rest of your strategic plan. Cost cutting tends to look messy, feel messy, create an atmosphere of confusion for your "remaining" staff and show little or no regard for a strategic plan of profitability and growth for your company. Today, you may save a penny here and there; tomorrow you may lose thousands for your shortsighted approach to costs.
Enhanced Profitability: Do you know what % of Revenue should be dropping to the bottom line? First you must define the bottom line. For a small business it may be different than a big business, public company, non-profit and so on. So for us we will define the bottom line Profit = Revenue less all expenses of running the business, less taxes to be paid, before owner's forms of cash received. Owners can receive cash in several ways: 1. Salary, 2. Benefits, 3. Perks, and 4. Cash or asset distributions. The difference between benefits and perks might be benefits = health insurance, perks = health club membership, Mercedes instead of Chevy 4 door sedan. I am sure you can relate!
Public information regarding the standard profit % in your industry may be hard to compare with your company as we have explained; their profit line may be different from your profit line. No one knows your business industry better than you so that % of Revenue is subjective to your goals rather than an industry standard.
Once you know what you want you can build the strategic plan to work towards that goal. Revenue Growth and Cost Control will be the beginnings of your plan. Deep within your plan will be the guidance of the specific drivers of your business the most complicated part of your plan. This is where utilizing the assistance of business advisors can help create a realistic plan for success.
Increased Cash Flow: All the Revenue in the world cannot pay the bills unless it is converted to cash. Certainly your employees cannot cash a payroll check that is represented by an invoice to your best customer. The office supply bill cannot be paid with a 60 day contract for services from a client. Cash is always king therefore your job is to create cash, hoard cash, invest cash wisely and at the end of the day, count the cash on hand to see how much of your profit is cash .
How to create cash: 1. Look at your inventory do you have too much, turning too slowly? Move inventory to cash with sales and bulk sale of old inventory. 2. Customer payments aggressive collections at all times first and foremost, turn sales into cash as quick as possible. 3. Equipment needs pay cash or purchase over time decision time on this one it's a case by case basis, ask the question and be sure your answer makes sense.
Remember the first step is acknowledging you have a problem. The second is to look to qualified business advisory services and turnaround specialists to help you solve those problems. The third is to put a strategic short and long term plan into place. The last is to hold yourself accountable to the plan with as much passion as you hold your company. Remember, denial is just the beginning of a better future!
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Diane Dutton is an MBA, CPA, Speaker, Woman's Financial Coach and Career Advisor, Author of "A Woman's Ladder To Success is Paved With Broken Glass Ceilings". and now the newest breakthrough work "The Winning Edge". With 29 years of executive corporate experience, she consults with CEOs of small and mid-size companies as well as speaks accross the country on business finance and helping women break through the glass ceiling of their career. Ms. Dutton is a member of NAWBO, WAN, NAFE, TMA, NSCPA and the AICPA, You can find more at www.businesswomenspeak.com.
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