December 19, 2018

How NOT to make a loss

This week has not been the most productive for me with issues of expected deliveries not happening, computers not playing and tax offices asking for what they already have – and me spending over an hour on the telephone (mostly on hold) to read HMRC what they had been given two months ago. I am sure you have had weeks like this. You get to Friday and wonder how much money the business has made as a direct result of your efforts.

Blank view pennyOther weeks the opposite happens, I get through to the tax office within a couple of minutes, speak to a nice helpful person at HMRC who suggests they can do something for the benefit of the client before I even ask it. Clients turn up to an appointment with their cheque book in hand and request to settle their account at the end of the meeting and then agree the date of the next meeting – so it is not they want to dispense with my services! Others send an email the same day as I send them the invoice, saying they have transferred the money into the company bank account.

Which sort of week would you rather have? What has this got to do with making a loss? The fact of the matter is that life is not perfect and by accepting this, you can build in ‘slack’ to cover the cost of repairs, the lost time, the extra staff salaries. When some new business owners come to me, they have worked out their expected revenue without appreciating the time needed to do marketing, administration, documentation and other roles that may have been done for them in a corporate environment. Even in larger firms, senior staff seem to think that preparing for an exhibition and attending it can just be done in addition to the usual work. Staff cannot be making sales calls while driving to and assembling a stand. When looking at costs, the set up day needs to be taken into account as well as fuel, accommodation etc.

forecastAs with much of business success it is all down to planning. Plan for the unproductive time and associated costs and base the sales required on having to cover these costs as well as those of the ‘good’ sales. If you do this, you will avoid a loss and if the worst doesn’t happen, you can make an even bigger profit.

If you need help in identifying costs you need to include in your plans, get in touch. If you want to share some of the hidden costs you have discovered, please reveal all below.

How much do your customers owe you?

If you go overdrawn at the bank, they are quick enough to let you know you have their money if it is not by prior arrangement. And they charge you to let you know and charge interest until you pay them back.

Birmingham-20121029-00115Would you be better off if you treated your customers the same as the banks treat theirs? It may be that you wouldn’t want to upset your customers and you would rather they did not go to the competitor every couple of years. But, you are in business. If people buy from you, they should expect to pay. It is up to you to make it clear before they buy, when you are expecting payment to be made.

If you operate with a bank overdraft, you know all about paying interest. If all your customers paid you within the terms you lay out at the start, how much smaller would your overdraft be? How much less interest would you be paying – all that then becomes profit and can either be used elsewhere in the business or be enjoyed by the business owners.

Many business owners don’t like to charge customers interest, but the banks have no problem! Remember, the alternative to charging interest is to either make sure you are paid before the work is done, or depending on the industry, issue credit terms and make sure you have a system in place to chase the moment an invoice becomes overdue, relentlessly until it is paid.

Penny LoweI do suggest a system as otherwise you can find you spend more time chasing money than making it. If you do find this is the case, you may need to revisit some more basic questions such as why do customers feel they don’t need to pay. Do you need to charge some customers a premium as you guess from the start they will be late payers? Do you need to hire someone to get heavy as you would rather keep them sweet for the next purchase they choose to make. I have been used as an excuse – and a threat when my clients are chasing money. My accountant is worried that you might be unable to pay and won’t let me do any more work until you do. If you don’t pay, you will leave me no choice but to pass this debt over to someone else to deal with (accountant or small claims court).

The trick is to be consistent and this is another reason to have a system. If ‘it’ can chase for you, it will free up time for you to do the more profitable tasks.

What tips do you have for making sure your customers pay? Enter your comments below.

How you can increase your productivity

We all wish we had more hours in the day, the question is where can we find them?

If someone said that it had been decided that the world would now operate on a 25 hour day, what would you do with the extra hour? It might only be an hour per day, but that equates to 7 hours in a week, which is actually nearly another ‘working’ day.

Birmingham-20121029-00114Would you use it to sleep, to work or to spend more time with your family? The answer may give you a view on how well balanced your life is. I know because I recently did the same exercise – the difference was that I was not being given an extra hour, I just wanted to fit more into my day without impacting on sleep or family.

The answer – review what you do each day by considering the outcomes, If you tend to lie in, does it leave you refreshed and inspired, or do you lie there because you are trying to avoid the inevitable? What could you outsource to free up time for the things you enjoy, and that bring in money. Whether this is meeting prospects or delivering your product/service. The chances are if you don’t like doing something it will take you twice as long – procrastination plus production!

Over the last three months I have outsourced two tasks and I am really grateful to those who have taken them on. The tasks are not yet concluded but nearing completion. Watching others progress them reminds me of how big a task they were and how much better it has been to outsource to somebody who enjoys doing it. To be given text to approve rather than write from scratch is quicker, more satisfying and I know it is moving off my to do list

gravatarSo, could you start work an hour earlier? Spend an hour less on Facebook or at the coffee shop? Could you set up standard templates for replying to emails, or could they even be automated?

Let me know below where you are going to find extra time and what you intend to do with it – even if it is only half an hour a day.

Would You like an upgrade?

How often do you ask clients if they would like to spend more with you? To sell more to existing clients is cheaper than finding new clients!

gravatarWhen we flew home from our holiday with British Airways, the simple question above resulted in them getting more income for not a lot more expense. They already had the air side lounge with food and drink and staff available. On board the plane the comfy seats would have been empty, the staff would have had time on their hands if we hadn’t upgraded. The only costs to them were food and drink and processing the extra payment.

This made me think of how often, or not, I try to up sell my services. If it is classroom training on QuickBooks, then every time. I feel that in most cases classroom training is too general. You only need an accountant who understands all, a business owner who understands nothing about accounts and a book-keeper that has used Sage for years and wants more of a conversion course. With this diversity, what level should I pitch it? Then add in the different business sectors that each of these may work in, how can you justice to all? I know one to one training would be of most benefit to my clients, so that is what I sell. I then give them a couple of options and let them choose.

If a prospect asked you what is different about your premium service, what would you say? What would be the benefit to them of paying you more? Is it a more personal service, delivery by the most senior staff, extras that the prospect may not even have considered?

The decision for the prospects comes down to available products and prospect education. If they can see what is in it for them, it will make their choice easier. It will also demonstrate what makes you different from your competitors. You have the prospects’ interest at heart.

What you are offering them is an educated choice. For them the ability to make a decision based on fact rather than simply going for the cheapest and living to regret it. Have you ever found yourself in that position?

If you haven’t already, make a list of what your business offers as an upgrade, then cost it, decide on a price and trial it. Remember, you are only educating your prospects on other choices available. You have nothing to loose and extra income to win. Wouldn’t you like higher profits?

Enter your comments below about whether you are going to offer an upgrade and why.

Why are you in Business ?

This is a question I often ask new clients. From my viewpoint, it gives me an insight into what they care about most. If they simply say to make money, this gives me the lead to ask how much money? How close are they to this goal? What are they doing to help them exceed it? If they say it is nothing to do with money, I ask more questions to find out why they feel this about money.

For many business owners, money is actually a secondary consideration providing they are making enough. But again, I would ask the question how much is enough? Please don’t try and work out your ‘earnings’ from your business as an hourly rate. For some business owners, the hours they put in may mean they are actually close to minimum wage. If you do 60 hours a week for 52 weeks a year at minimum wage, your salary would be just under £20,000. I would suggest that your life expectancy would not be very good either.

I am sure that you are not one of those that lives purely to work and pay the bills. At an income level described above, it would be much less stressful to be employed by someone else and let them make the strategic decisions.

So, how much do you earn? Check on you last year’s tax return. How many hours do you work? How much do you charge for your time? This may not be a direct hourly charge, but when you attend sales meetings trying to convert a stubborn prospect, or spend time resolving issues that needn’t have happened, have a think about how much this is costing you. What else could you have been doing with your time that would have earned you/your business more money? That is certainly how I feel about the domestic cleaning and ironing. I can earn more in the 3 hours a week I pay for help, than it costs me to employ that help. What parts of your business can you apply the same logic to?

So whether you are in business to make money or provide a good product or service, remember you have still got to pay the bills. Your time is valuable, you only get one life – make the most of it! Need help understanding your figures ? Contact me for a consultation.

What Costs can you control ?

Do you know what benefits you get from the costs your business incurs? Do you know what it is paying out for, and to whom? As time moves on, so does the needs of every business – and business owner. Are there alternatives to what you are currently spending your money on that could give you a greater benefit?

A simple example may be when do you upgrade a computer system further rather than biting the bullet and replacing the systems? Although it may seem painful at the time, I know many accounts staff who spend time and frustration waiting for their system to do things – or rebooting when they have asked it to do too much. For some reason it is often forgotten how much time the accounts department spend at the keyboard – or waiting for their computer to give them an answer! How does that come back to costs? The tasks that they can’t do as they do not have time may be costing you money. Payment of unpaid invoices not being chased meaning the money is in your customers’ account – not yours. Relationships with suppliers strained as their bills are not getting processed as quickly as they might. This may lead to early settlement discounts being missed or the opportunity for direct debit discount not being investigated.

I am not intending waving a flag to help the accounts department, just asking that you acknowledge the contribution that they make to the business. As a business owner, you don’t need to enter the figures and chase the debts – that can all be delegated. What you need to do is understand the figures. It is not the calculation that matters it is what you do as a result of the answer. Don’t be put off by the numbers, others may like those better than you. In the same way you may or may not enjoy driving a car, the fact you can – or can hire someone – makes most locations accessible to you. You can then choose whether you go there. The important thing is you have the choice providing you have the knowledge.

If I can be of any help contact me - oh and big news on the Book Next Week !

Are you charging enough ?

 

What is enough for you? This leads from the question ‘why are you in business?’ This week I had a client who greeted me with the comment: “Every year when I drive over with my books, I tell myself I really ought to put my prices up”.

She provides her services mainly to the elderly in care homes with limited incomes. Her children have both left home and the second one is now going through university. Her main reason for working was to pay for their education, but she also enjoys her work. Do you think she should put her prices up?

Pricing is not all about making the greatest profit you can, it is about understanding the figures so you can decide what is appropriate. Do you want to price yourself out of the market, or just appeal to a small niche? Someone I worked with a couple of weeks ago had just taken an order for a dining table at £35,000. That is not a typo. I can confirm that I will not be placing a similar order.

In order to ensure you make a profit, you do need to understand what costs are involved, both in the delivery of that particular sales and in the running of the business. If you don’t have precise figures available, just jot down what your overheads are in a year divide, by twelve and realise how much you need to make in a month before you even consider the costs involved in a sale. This is why you cannot afford to work for free. By all means give a sample or taster away, but make sure your customer knows this is not the norm.

If you feel that you need to talk through your pricing structure please get in touch