Your business is at an important crossroad. How do you determine the best route forward if you are to achieve your goals of business growth, profit and personal lifestyle?
For many business owners the COVID crisis and business lockdowns have provided a catalyst to critically review how their business operates so they can improve profitability and performance. Others have preferred to bunker down and wait for the crisis to end, relying on government assistance and hoping that they can recover when business picks up.
Sadly, many of these businesses who are not prepared or able to make changes will continue to struggle, and may not survive. Receipt of government assistance has papered over many of the cracks in their business. Lack of customer acquisition strategy, marketing and cost control, which seemingly are not important when there is a steady stream of sales income and cash flowing into the business when times are good, can have devastating effects on unprepared businesses.
What you can't see can hurt you. Equally painful, what you can see but choose to ignore, will still hurt you.
Lack of cash income is an obvious sign your business needs help. Unfortunately, some of the tell-tale signs your business is in trouble aren't so easily spotted. In fact, they may be practically invisible. But just because you can't see the problems doesn't mean they don't exist. And unless you deal with them quickly, your business' health will begin to suffer.
So how do you find out what you don't know?
Imagine you've just come across someone who's been injured in an accident. Before you can even think about treating them, you need to assess the situation, and get information about:
- the injured person
- their surroundings
- the other people involved
- any signs of injuries that need urgent treatment.
How do you find the hidden information about your business' health?
Of course, treating your business is a lot different to treating a person. But you still need to assess the situation, and gather as much information as possible. And that means finding out about not only what you can see, but also what you can't see. You need to learn what you don't know, and make the invisible visible.
You can get a lot of this 'invisible' information from your business' accounting system, providing it's fully reconciled and up to date. Fortunately, modern cloud-based accounting systems such as Xero make it easy to keep your accounting information up to date.
At a minimum you should know:
- your outstanding debtors (money owed to you from customers)
- how much you owe to suppliers
- how much cash you have
- your stock or inventory
- who your customers are
- what your customers buy from you and when they buy.
One surprising, and even alarming observation from the recent COVID Lockdown and availability of Government financial assistance, is the number of business owners who do not have:
- An accounting and record keeping system for their business; which is
- Up to date; includes all business transactions and is accurately maintained;
- Is linked to sales, inventory and Customer relationship management (CRM) Systems;
- A process for regular reviewing their financial information; and
- An understanding of what their financial information means
So here is a 7 step plan to improve your business health
Step 1. Before you can create an action plan to move forward. You need to have your financial and accounting records accurately prepared and up to date.
It's like making a cheesecake and only focusing on the creamy filling and toppings but ignoring that you need to have a solid base. Otherwise the cheesecake will fall apart into a huge mess very quickly!
Step 2. Now that you have the information you need, it's time to find out what it all means, and come up with a recovery plan for your business.
Fortunately, you don't have to do it yourself. Just as ambulance drivers and doctors are trained to assess and treat a patient, finance professionals can use the information you've gathered about your business to come up with a plan to get it back on its feet. Your business advisor can guide you through this process. A Business Assessment can help. It can help you understand where your business is right now, and even tell you where to look for the 'invisible' information you need
Step 3. Create your action plan. Document where you want to be, how you are going to get there, the resources or steps you need to take, who is going to be responsible, and when each step needs to be completed by.
Step 4. Implement your plan. There is no point having a great plan if you don't implement. Research has shown only 10% of business plans get implemented.
Step 5. Monitor and review. Are the actions you have taken delivering the results you expected? If not, you need to change or refine what you are doing.
Step 6. Repeat. Business and the conditions in which you operate are regularly changing. You need to be constantly reviewing and setting new goals.
Step 7. Celebrate your success. Make sure you celebrate each milestone and success along the way.
If you're concerned about the health of your business, and need someone to create a health care plan to get it back on its feet, don't hesitate to get in touch with Pretium Solutions at www.pretiumsolutions.com.au.
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