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Keeping your Business Afloat
by Jean Knill
Every entrepreneur or business captain has to keep firing on all fronts. You have to be out there meeting contacts, customers and suppliers. You have to be delivering what you promise. You have to be overseeing your staff and keeping them happy and loyal. You have to take care of your premises and equipment.
Sometimes it’s hard to step back and take a good look at the big picture, and then check all the little elements within it. But it’s crucial that you set aside time to do just that at regular intervals. If little problems go undetected on the bridge, they can escalate into major calamities that can take you down. So where are these little problems likely to surface?
To be sure you’ll have money in the bank to keep your business ship afloat, you need to keep your sights on these little islands:
• Credit Control. Are your customers keeping to your payment terms? If not, are the terms really clear? Contact the defaulters to make sure they understand them. If not, get something in motion to make things clearer. Then it’s your turn to recognize if any of them are having their own cash flow difficulties, whether you can assist by negotiating staged payments, and how much risk is attached to continuing to supply them.
• The Order Book. Compare your sales to the same period last year. They should be at least equal, if not higher to reflect your business growth. A reduction in sales should set off a warning and get you into life jacket mode. You need to know the reasons and whether this is something affecting your whole sector, or if competitors are doing better. You need to do some brainstorming to find ways to get things steaming again.
• Profit Margin. Are your sales making enough? Is your pricing competitive and still enough to make a profit? In the early days it might be just about breaking even, but eventually you need to fund a bit more ship building, and perhaps take a bit more salary than you pay your staff.
• Overheads. If you are at anchor in a time of consolidation, you need to get your overheads as low as possible. It’s worth reviewing your expenses on a regular basis to see if you can make any savings. If you are steaming ahead in a planned growth period, you need to keep the plans under review and make sure you are not going over budget, or that you can cope with any excesses.
• Your Bank Account. Do you have the right arrangements in place, so that you’ll never have a bounced check? Do you have a contact that you can go to if you’re afraid of drowning?
• Your Accounts Staff. Are they efficient and loyal? Do they need training in any areas? Can you be sure they will bring any problems to your attention in good time for you to deal with them before the ship sinks?
To avoid any floundering in heavy seas, important ports of call are:
• The Supply Network. . Do you have good working relationships? Are suppliers keeping their end of the bargain? If not, could your expectations be too high or is it time to do some market testing and be sure you are not dealing with pirates? First though, check that your company has been making payments on time and not making things difficult for them.
• Your Operations Team. The indicator to look for here is staff turnover. A high percentage of people jumping ship means you need to find out why and get the problem fixed at a good rate of knots. Do you have the right structure, with the right crew in every area? Do you have the best procedures for gaining the right recruits?
• Products and/or Services. Are they adequate? Do they wow your customers? Do you need to update anything? Do you need to develop more of them? Is there another area you could move into to be more competitive?
• Practices and Procedures. Are you getting each job done in the most effective and economic way? Do they get the best results possible to keep your ship steaming ahead?
The Customer Base
A sure thing to sink your ship is an imbalance in your customer portfolio. You need a variety of customers so that you are not too reliant on any of them. If you are not careful, customers can be like sirens, who will lure you onto the rocks with false hopes and then leave you to break up and die.
Of course, it’s not usually as deliberate as that, but many a small business has gone under when a major customer has left them with only small fry orders. You need to spread your order book and if it seems to be relying too heavily on one or two key customers, boost your marketing efforts to expand your customer base in appropriate ways.
Keeping on Top of the Big Picture
You can get a fair idea of whether your ship is steaming or sinking by looking at it as a whole. Having good management and financial reporting systems in place is vital to reassure you or confirm your misgivings.
Wherever you see problems, they need to be addressed immediately. Recognizing these areas is half the battle won. Often the solutions will be glaringly obvious. But if you don’t know what to do, getting in professional help might be the cheapest way to save your ship.