Over one-half of all new businesses fail within the first 3 years of trading. But with a sound plan to succeed, some business knowledge, and most importantly, a great dream, you can dramatically improve your chances of surviving, growing, and succeeding.
Have Long Term Goals
The primary task in managing a business is deciding its long-term objectives. If you can imagine what you want your business to look like in five years, you have a better chance of achieving your dreams.
Also read: Sales vs Revenue: Are Sales and Revenue the Same?
Creating your Vision
You need to seriously think about what products and services you will offer and to what type of customer. Consider your future market position and competitive advantage.
Do you envisage expanding and if so, what turnover, outlets, staff, and annual growth rate do you anticipate? Think big and dare your dreams to come true.
Plan your Success
You wouldn’t start on a long journey without a map, so don’t do it with your business. Take your dream and plan the main steps you will need to take to get from where you are now to where you want to be in 5 years. Then plan this in detail for the next 12 months.
Include a cash flow projection, so you can be sure you don’t run out of cash along the way. Review what you have achieved every 6 months and plan the next stage of development.
Review your Customer Profile on a Continual Basis
Most businesses can identify future outgoings. Sales projections are more difficult. Market research helps here. Review the profile of typical customers and note any changes.
Look at your sales pattern. Has it changed dramatically? If so, how will you redress the balance? Are you overly dependent on any specific products or customers? Who are your most profitable customers? Do you look after them to ensure repeat business?
Identify your Most Profitable Products
Do you concentrate enough on these to maximize profits? Exactly how many inquiries do you get anyway? How many of these ask for quotations? How many go on to buy? What is stopping the others from going from one stage to the next?
Keeping on top of your product sales will allow you to recognize sales trends, which will in turn increase your sales.
Improve your Image
How can you improve the image people have of your business? Why do clients buy? Why don’t they? How important is price or quality when closing a sale? Creating a strong image will help increase the success of your business.
Consider the Competition
How do you compare with your competitors? Can you learn from them? Why do people buy from them, not you?
Setting your Prices
Pricing is a compromise between cost, quality, demand, and competition. But when setting a price, remember to cover everything. Using a free delivery service as a sales initiative still costs you money.
Margins are very important. It is often better to sell less at a higher margin than to sell more and make less money.
Discounts
Giving discounts is a great sales tool but you must remember to consider their real impact on profits. If you buy something for £70 and sell it for £100, you make £30.
If you offer a 10% discount, you give away one-third of your profit. So you have to sell 50% more to finish where you started.
Special Promotional Discounts
Continuous discounts soon become part of your customer’s perception of your price structure, so introducing Special promotional discounts is better. Ideally, set a time limit on them. This allows you to measure their real impact.
Managing your Cash Flow
Your precious working capital should be funding your growth, not your customers! Remember that customers cost you money until they pay their invoices. It is considered professional, not pushy, to ask customers to agree to your payment terms when taking an order.
Get the invoice out the same day as delivery, clearly marking when payment is due. Give customers a credit limit, both in time and money. If they reach it, don’t take new orders until the invoices are settled.
Consider factoring your invoices to generate extra working capital. It’s important to remember though that you will be charged a percentage on everything you factor, which will reduce your profits.
Also read: 10 Marketing Strategies Rooted in Human Psychology
Give your Bank Confidence
Your bank manager is there to help. To do this, they must have confidence in you. So even if you are not borrowing money, keep them informed. This is where your business plan comes into its own. It shows them the route map to your goal and they can use it to benchmark the various stages.
If you consistently reach the targets you set yourself, you will find it that much easier to raise finances when you need to fund growth in the future. Give your bank manager regular and clear updates and provide accounts; don’t leave it to them to have to chase you on a continual basis.
Annual accounts show how you have managed the business historically. Regular management accounts will show where your business is today. Keeping your bank manager well informed and happy will help you to raise additional finance in the future.
