Last Update: January 29, 2015
Financial discipline and paying close attention to details is more important now than ever if you want to succeed in business and continue to thrive during challenging economic times.
You may have been fortunate in the past. You also may have found it feasible to operate without a detailed, written plan and systems/processes. But the shifting global economic landscape has changed all of that. If you want to prosper, there is only one thing that is for sure – uncertain times call for deliberate decisions and proven practices.
Here are seven tips to help you succeed in business.
1. Begin with the end in mind.
If you don’t know exactly where you are going, how will you know when you get there? Now is the second best time to decide on your strategy, set your goals and document tactics and timelines. Keep it simple – write a 2-3 page summary of what you intend to accomplish in 3 months, 6 months and 12 months.
2. Focus on cash flow not profit.
You cannot buy a house or a new car with “profit” from your business. Make it your mission this upcoming year to develop and maintain a weekly/monthly cash flow forecast for your business. This is not hard to do but it does require discipline and a simple excel spreadsheet.
3. Collect your debt now.
How many days does it take to collect your debts on average? Whatever it is, make it your goals to reduce this by at least 10 days. You may be surprised to know that if your annual revenue is around $500,000, you could save yourself up to $2,500 in interest carrying charges simply by collecting your debts 10 days quicker on average. Pay attention to customers who are taking longer than usual to pay. Now is not the time to be extending too much credit if you are concerned about their ability to pay.
4. Rank your customers.
Do you know who your best and worse customers are? Have you ever tried to calculate how much profit you are making from each customer or group of customers? If you don’t know the answers to these questions, today is the best time to start tracking and measuring this.
5. Fire your worst customers.
Everyone knows that it’s cheaper and easier to garner incremental business from existing customers. Some even argue that it is 6 times cheaper and 75% easier to convert a sale from someone who already knows and trusts you. If you have unprofitable customers, get rid of them and focus your attention on your best customers.
6. Trim your product range.
Contrary to popular belief, it is better to have money in your back pocket than tied up in stock sitting on your shelves for months on end. The longer it sits and does not turn over, the more it actually costs you in lost opportunities. Spend 2 hours today calculating which of your SKUs or stock lines are your worst performers; make it a priority to sell those quickly to release some much needed cash. Consider reducing your overall investment in stock.
Compile a spreadsheet of all the SKUs you carry and then run two separate columns – one for how many units you sell on average of each per month and the other being the total units on hand. If your stock gets delivered quickly, you should never be carrying more than one month’s worth of sales at any given time.
7. Monitor your breakeven and key numbers.
The most important day of the month is the day that you break even and start making a profit. If you don’t know which day of the month that is, you need to find out today. Knowing this number allows you to monitor your performance and take measures to correct issues right now. Waiting until the end of the year for your accountant to produce financial statements is not a good idea – if you are behind, you need to know now so that you can correct the situation.
These seven simple steps will help you set attainable goals, measure business performance and develop actionable financial knowledge. Most importantly, developing discipline and a detail-oriented outlook in business will only help you thrive in the long-term.