Wednesday, April 16, 2014

How to turn your business around - Part II: Setting Goals

A successful turnaround plan can take a business from where you are to where you want to be.  To get to where you want to be, you need to determine what is working and what is not.  The ability to read financial statements is crucial to this task.  Every expense account needs to be reviewed and the spending levels questioned.  Can you save money by shopping around for a different vendor?  Have you done enough business with a vendor to ask for better terms or pricing? 
The key to the goal setting is to make them specific so having a budget is helpful at this stage as once you set your goals for spending levels, you can compare actual spending to your budget (goals.)   This comparison of actual to budget helps hold the business owner and staff accountable. 
You also want the goals to be reasonable, enough of a change to be a stretch but not so much that it is not achievable.  Cutting costs mindlessly does little good to a business as some spending is essential to the existence of the business.  Eliminating all marketing is not a good idea.  Paying for marketing and then not tracking the success of the various elements is not a good idea.  A good marketing plan requires the tracking of metrics to determine the success of each campaign.  Asking new customers how they came to the business is vital.  A business is throwing money away if it doesn’t track how customers find them or select them to buy from.
Revenue goals are also important and again should be specific and achievable.  Saying that you are going to double sales in the next year sounds far-fetched.  Saying you are going to increase sales 5% next month by initiating more cold calls to extend your sales area is much more reasonable. The key is to have specific steps to follow to achieve the sales growth.

Turning around a business successfully can be done with proper analysis and goal setting which includes the preparation of a budget and the determination of specific metrics to track, the comparing of actual results to the budget and the numbers of other metrics to determine the progress of the plan.

Friday, April 11, 2014

How to turn your business around

Turning a business around is a little like making a New Year's Resolution to get in shape.  You can't just make the resolution and expect to lose weight and build muscles.  You need a plan to achieve the goal and the drive to follow the plan.

The same is true for turning your business around.  If you're not achieving the sales and profits you hoped for, you need to determine what changes are needed to get the success your business should reap.  The first thing you need to do is learn to read your financials. Understanding where your money is being spent and where you can cut back is very important.

One area which is frequently overlooked by non-accountants is cash flow.  Understanding when the money comes into a business and when it goes out is even more important than how it occurs.  If your customers are paying you in 60 days, but you are paying your suppliers in 30 days, you are going to run out of money unless you have a line of credit or enough capital to keep the business afloat.

Hiring a consultant can be useful to provide an impartial, fresh perspective on your business.  One key to  the success of this relationship, is the owner's ability to take advise and implement it.  If you don't want to make the hard changes, don't waste your money on a consultant.

Experts on achieving New Year's resolutions are big on writing down your goals.  The same is true for business goals.  Write down specific goals for your business and make sure you also determine the steps needed to achieve the goals. We will get more specific next week.