With the end of 2015 approaching, many businesses are looking at their business results for the first half of the financial year and finding that things aren’t as rosy as they had hoped they would be. With Christmas just around the corner this can be a mixed bag for business results, with some businesses, especially in the retail sector, looking forward to a strong end to 2015, other industries are expecting to see a decline in income as people invest their hard earned dollar elsewhere.
For many businesses it has not been a great year to date, with the mining boom over and the construction industry slowing, nervous consumers are not spending their money as freely, leading to lean times for many businesses.
So if you’re experiencing a slowdown in your profits, now is the perfect time to do a little health check and overhaul on your business and its finances to identify how you can improve your cashflow.
If you can’t improve one you need to reduce the other
Your business profitability is made up of two factors, firstly how much people buy from you, so your sales. You need to look at all potential ways you can encourage people to buy more from you or purchase from you more often. The second major factor that impacts upon your profits is your business costs. So if you reduce your costs, you can sell less and still make a profit.
a) Improve cashflow by selling more
This may sound obvious, yet this is harder than reducing your costs as you need to rely on others acting to get the result you want. However there are a number of ways you can try to boost income, we have identified some of these below;
• Sales, discounts or for a limited time special offers – encourage customers to spend with you by giving them money off a particular product. This works best when it’s for a limited time only i.e. for this weekend only get 20% off… or buy one get second half price. This is a great way to get rid of old stock, make room for new stock and just boost interest in your product or service. However a word of caution, make sure you understand how much you can reduce a product or service by and still cover costs. You don’t want to make your cashflow problems any worse.
• Bundle products or services together – this way to increase the perceived value by customers and are more likely to sell more.
• Think of a different use for your product – There may be other ways people can use your product that potential customers have not though about.
• Touch base with previous customers – See how they are going and if they have any other needs you can assist them with, are they getting all the value from your product or service that they could be getting, could you upsell anything like training, complementary products etc. It’s much easier to sell to existing customers than it is to attract new customers.
• Are you explaining all the USPs and value of the product clearly – think if you are selling your product to customer effectively. Most people would part with $100 of they were going to save $500, or save time, if it was going to make their life easier or better. List all the uses for your product and potential benefits.
b) Reduce your costs
Reducing costs is one of the quickest ways to improve cashflow and increase profits. Yet you need to be sensible, there are some things that if you cut will impact the efficiency of your business, or the quality of your product or service which will cause a decline in sales.
• Review business expenses -First step is to review all of your business expenses. Go through your account and look at everything you are paying out for. Are all of these expenses necessary to run your business? We have all signed up for systems, memberships and tolls that we think we will use, however are too busy to learn how to use them or they are not what we though they would be. However we keep paying the subscription just in case we want them or because we have forgotten that we have subscribed to them. Cancel any of them that you don’t use, this is just wasting your money. Then look at some of your biggest expenses. It is easy to keep buying things from the same people, but when was the last time you shopped around to see if you could get a better deal. Get quotes from other suppliers and see if you can get the same quality product elsewhere for a better price. Are you able to change the spec of the products and service you use without it impacting the quality of your end product?
• Think differently about your business – The world is changing and traditional business models are no longer always necessary. Are you able to change the way you manage and run your business? Do you need an office or could you run your business from home? If you need an office in a certain location, do you need it all the time or could you hire an office in that area one day a week and move to cheaper premises? Do you need a full time PA or could you outsource to a VA, cut costs and still get the help you need. The internet and the cloud have opened up endless possibilities for businesses to operate outside the normal model, these changes could save you thousands, you just need to think about your business differently.
• Is your business running efficiently – Think about both the people and processes you use. Are you utilising staff to their full capacity and ability? Do you have KPIUs so both you and your staff know what they should be doing? Are you tracking and measuring these KPIs? Then think about your processes and technology with the business. Are you using old antiquated systems that are slowing you down. There is always new technology emerging, can this assist you run your business for less, improve your efficiency or competitiveness? Sometimes you need to invest in your business to get the results you need.
When things are tough it’s a great time to take stock and give some careful consideration to your business, how you run it and what you could do to improve it. When you’re busy you don’t have time for such things. So view a quiet period as a time to re-evaluate what you do and how you do thing to see if there is anything you could do to improve it.
If you are looking for ways to improve your business, whether it’s your cashflow you want to improve or just generally how your business runs and performs, we can help. Check out our online business improvement report. Simply log in via the link below, answer the questions about your business and we will send you a detailed report outlining ideas and areas you can focus on to improve your business. The process only takes about 15/20 mins and you can stop and save the answers and return at a later date should you need to. So take action today to identify opportunities in your business.
FREE Business Improvement Report