Every now and then it’s important to stand back and, reassess your priorities and remind yourself what running your own business is all about. The end of the year is an ideal time to do this and decide what you want to achieve in the New Year.
The starting point is to review the five key areas which make up a healthy business and then decide where improvements can be made.
The first of these is your customers. Your most important job as a business owner is winning and keeping customers, improving your understanding of their needs and the competitive environment in which they operate. If you know your business numbers you know that your sales are a function of the number of customers, the average transaction value and the frequency with which they buy from you. Steadily increasing each of these metrics is the way to stay healthy and grow.
The New Year is an ideal time to review your marketing plans for the coming year, to take advantage of new opportunities, and review your product portfolio. Update your marketing matrix to see which customers aren’t buying some of your products and devise strategies to upsell and cross sell to them. Run your website analytics to see which landing pages are getting the best conversion and ‘tweak’ those which aren’t. Review you Adwords campaigns to see which are giving you your best ROI and adjust your investment accordingly. Start a quarterly newsletter, devise a direct mail campaign, launch a premium product – the opportunities are endless.
Know your business numbers
A characteristic of all successful, healthy businesses is that their owners know their business numbers. By this I don’t mean the income statements and balance sheets prepared by your accountant for the Inland Revenue and the bank, which tend to be historical and of little value in understanding what is really going on in your business and in making day to day decisions. The numbers you need to know day-to-day and week-to-week are your sales and margins by customer and product, average transaction value, cost of customer acquisition, conversion rates and lead to sales ratios. These are the numbers that will drive your business to greater success; ask any wealthy businessman.
Just as a healthy body is lean and trim so should your business be. Controlling costs and cutting out waste and unnecessary expenditure should be an ongoing process in a healthy business. It is estimated that between 15% and 25% of the overhead costs in most businesses can be eliminated by better procurement, improved supervision, less rework and cutting out waste.
The lifeblood of every business is cash flow, with the main inflow usually coming from sales, but too few businesses properly budget their future cash flow in sufficient detail. An annual budget and cash flow forecast, integrated with projected monthly balance sheets, should be the minimum requirement to identify upcoming peaks and troughs in cash flow. Only by identifying seasonal requirements, working capital spikes, capital expenditure and tax payments in advance can you project when you may need additional funding.
Take time out over the holiday season to review each of these five areas in your business and make a healthy start to 2014.