| You can find out how to increase your
profits by a minimum of 67% at my forthcoming seminar on Tuesday
12th October at The Rural Enterprise Centre, Battlefield
Enterprise Park, Shrewsbury.
Findout more by
visitingwww.the-entrepreneurs-coach.comHave a brilliant
month
Best
Wishes
Gareth
P.S. Follow me on ecademy  
 Dear
Entrepreneur
The Purpose of a Business is to
create cashflow.....
Now that could be
quite a contentious statement to some people. Some would say that
the reason why you are in business is to serve your customers,
because if you make your customers your focus ,the profits will
follow. Whilst this is absolutely true, it is not what I am talking
about here. Let me explain.
To some, the word
"profit" in business can be a dirty word, as some people associate
it with ripping customers off, when really this isn't the case and
the reality is those people haven't worked out how to deliver the
customer value and make a
profit.
In the randomness of business, you can get lucky
breaks as the golfer Gary Player once said " The
harder you work, the luckier you get." But the opposite is also true as after a period of
success, problems and challenges may occur at some
stage:
divorce.
ill health, yourself or someone closest to
you.
a large bad debt owed
to your business.
a law suit against
your company.
a competitor becoming aggressive in the market
stealing your
customers.
shifts in financial exchange rates.
Or, even just a change
in the economy as we have just seen.
If one or multiples of
these problems occur you will need something to fall back on. As
someone once said "wealth is what you have got left over if you
lost everything". So it is a universal principle that as a business
grows it has to make a profit in order for it survive if things
quickly change. Basically
whilst things are going well you owe it to yourself to make "hay"
whilst the sun shines and with the profits you make you invest,
invest, invest so that you have something to fall back on if
something should ever become a
problem.
Your business has to
make profit to ensure cashflow, so the purpose of a business is to
generate enough of a flow of cash so that you can invest into other
things as none of us are
indestructible.
Some business owners
forget that ultimately they have the responsibility for not only
serving the customers but ensuring that the suppliers and team are
well looked after too. You have ultimately got other people's lives
in your hands. Your team have mortgages to pay and families to look
after. Your suppliers, big or small have the same responsibility
and if you don't or can't treat them fairly and pay them on time
this will have a knock on effect down the line of effecting your
business credibility and thus sending you into a downward
spiral.
The problem is that
the majority of businesses rarely make more than 5% net profit
after the business owners have paid themselves which rarely means
that that there is enough to invest anything substantial into other
things.
My rule is that any business should be
making 15% net after the business owner has paid themselves. But
the next question to many "is that possible in my
business"? |
 Is leverage your business' greatest
asset?
I
don't know about you but the first time someone talked about the
word "Leverage" in a business context I looked at them as if to say
"what the hell are you on about" and in fact the next thing that
entered my head was "not another meaningless American
word".
That
was seven years ago and at the time I was the owner of a business
with sales of over £4 million.
Ironically at that time, I was
one of many who didn't understand what leverage was and despite
having good systems which allowed me to employ many people to work
for me, the reality was, I had no "leverage". Whilst
I was on my way, like many, I had no idea what leverage was,
therefore how the "hell" was I going to get
there.
In the modern day you hear many
business gurus talk about how important leverage is to you as a
business owner and how it is the thing that you must do in order to
make the most of your business.
So what does the term leverage
mean and why does it matter to you?
Ok to do this let's start from the flip side:
what are the symptoms of a business with no leverage?
Here are some of the symptoms:
-
Not being able to generate good or enough sales
leads for your business and treating marketing like an
expense.
-
Prospects enquiring about your products or services
but not buying or continually asking for
discounts.
-
Word of mouth being the only marketing strategy you
use.
-
Your staff need your continual
supervision.
-
You struggle to recruit the right
people.
-
You are working long hours.
-
You struggle to make decisions.
-
You continually encounter cash-flow
problems.
-
Your business is not making more than 10% net
profit.
-
You are reliant on the sale of your business to fund
your retirement.
Whilst that list is not conclusive, it gives you an
idea of the types of challenges a lack of leverage causes. So what
can you do to solve the problem and how can you organise yourself
to leverage your business?
Firstly here is the definition of leverage: "the art
of doing more in your business with the same or less
resources".
Can you imagine doubling the size of your company
but keeping your overheads the same? How much more money would you
make without having a cardiac arrest!!
So what are the key areas for you to focus on in
order to gain leverage in your business and how do you measure
it:
-
Develop your marketing so that you gain a return on
your investment. For every £ spent at least £2 comes
back.
-
You have an evolved sales system measuring your
conversion rate which is improving.
-
You can manage and measure your team through key
performance indicators, which as a result, allows you to reward
them.
The finance in your business is transparent through
having the correct financial information. At any moment of any day
you should be able to understand your debtors, creditors, the
financial position of the company year to date, what products and
services are profitable...what aren't, what your gross and net
margins are and the performance of your team etc
etc.
To gain leverage you should be measuring each of
those things through the systemisation of your business. Because
ultimately you should be able to leverage one further
thing: Your wealth. Each of the following things
should be growing or improving:
-
Your health and fitness.
-
Your relationships, family and
friends.
-
Your own internal happiness and
securityYour spirituality: Core purpose, beliefs, and
values.
-
Contribution to the community and
charity.
-
The money you have in your bank
account.
-
Your investments.
Just think about that for a moment, is your business
helping you you leverage your wealth?
|
Top Ten Tips for increasing business
values......... 
Lets take a look at the views
of my fellow business professionals on business
matters.
This month Roger Smith of
Stirling Business Solutions gives you the top ten tips on selling
your
business:
Roger
says.....
Should you be thinking of
selling a business in the medium term or if you know a business
owner who might be - our top ten tips for increasing business
values are as
follows:-
1) Focus on
selling. Nothing happens unless selling is taking
place. Concentrate on selling the benefits of your
products and services rather than just the features of your
products alone. You don't have to have the best products but an
"outstanding service" can lead to an "outstanding performance".
Selling is a numbers game (it is easier to approach twice as many
prospects than to suddenly become twice as good a salesperson) so
make sure the activity level is going up - not down! Companies get
strung along into receivership because they can't sell or can't get
the money in; buyers can then buy your business for next to
nothing.
2)
Review your
sales plan. There are only 4 ways to grow a
business - (i) Growth by acquisition, (ii) Increase number of
customers, (iii) Increase transaction values by selling more
products & (iv) Increase frequency of sales.
3) Increasing sales/profit
record. Aim to demonstrate consistency, preferably
with increasing sales/profits, it will help substantiate the asking
price and one less reason to talk the price down. Remember that
loss making businesses are difficult to sell - if possible, turn
the business around first and then sell.
4)
Review the marketing plan. Marketing can be best
summed up as "identifying and supplying a customer's needs at a
profit". Treat marketing as an investment rather than a cost and
work out how much you would be prepared to invest in order to gain
a new customer. Review new markets for existing products or new
products for existing markets (be wary of new products for new
markets as this is where the greatest risk lies). Try, test and
measure at least 10 different marketing methods to gain new
enquiries and customers - cut out the ones that don't work and
invest heavily in the ones which do. Gain customer feedback on your
products and services.
5) Review
the Customer Base. If your business becomes reliant on any
one customer, don't expect the same price for the
business where a business does not have
to rely on any one customer. Buyers don't like taking
on high risks, so why should you - make sure the risk is spread,
with no more than 10% reliance on any one customer. Also, try and
cultivate customers who are prepared to agree to "rolling
contracts" so that sales become more predictable - businesses with
sales contracts in place are more valuable on price/earnings ratios
when the time comes to sell.
6) Review
prices and margins. The more profit you generate,
the more valuable your business will be. People think customers
buy on price but they rarely do - only 10 to 15% of the public buy
on price as what customers really want is value for money - the
prouder the price, the better the deal! The most successful
businesses are customer led; they don't necessarily have the
cheapest products. Put prices up if discounts are required.
Pricing is key to profitability - for a 30% Gross Margin business,
if you reduce prices by 10% then you will need a 50% increase in
sales just to stand still; a 10% increase in price, you would need
a 25% drop in sales volume before you start losing out! This
principle is often misunderstood, so if not accepted in your
business, we can provide a telephone conference meeting and talk it
through for free!
7) Value
your assets. The greatest asset in any business is
People followed by Customers. Make sure you have the right people,
sitting in the right seats, preferably before you start driving the
bus in the first place! Make sure everyone has a Contract of
Employment and Job Description in place (these will come up in due
diligence). Look after your key people - losing them at the time of
selling a business will probably jeopardise the deal.
8) Review
the Management Structure. Businesses are difficult
to sell if the Business Owner "is the Business". The 3 main roles
are Make it (Ops), Sell it (Sales), Count it (Finance). Find ways
of making sure the business is not reliant on the owner - look at
the management team to see where additional responsibility can be
taken on or consider employing someone to take on tasks to enable
the business to become more "independent" of the owner rather than
totally "dependent". If the senior team is too small, consider
taking on a non-executive Director or Consultant to benefit from
their outside knowledge & experience and offer them as
"continuity" when negotiating the business sale. Make sure Board
meetings are held regularly with an Agenda and Minutes/Action
Points recorded - don't miss "future business development".
9)
Make sure
your information is up to date. A well run and
administered business will increase the perceived value and
nothing puts off potential buyers off than lack of up to date
information. This includes Statutory Accounts, Management
Accounts, Order Book Values, Staff Contracts of Employment, Staff
Handbook, HR records, Job Descriptions, Copies of Leases, Asset
Lists etc etc.
10)
Contact Stirling! Don't over estimate the current
value of your business if you are looking for a quick sale without
thinking it through - it will only lead to time wasting,
frustration and disappointment. Take professional help and advice
in developing and selling a business successfully, from our
great team of
people , before the
time comes to sell. Our main purpose of our services is to add value to the lives
of Buyers and Sellers, starting off with the first meeting free and
without obligation.
Email us in confidence at rsmith@stirling-uk.com
or call Roger
Smith on 07771-957166
to see how we can
help. |
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Business
Tools
and Resources
|
Forth Coming Seminars in October
2010:
The 7 Steps To A Profitable
Business
Tuesday 12th October 2010
3.30 to 6pm
Entrepreneurs Are
From Mars and Business Owners are From Venus
Tuesday 12th October 2010 2pm to
3pm
Both are
being held
at:
The Rural
Enterprise Centre, Battlefield Enterprise Park,
Shrewsbury
To book either
seminar
Download the flyer
at:
www.the-entrepreneurs-coach.com
email:
success@the-entrepreneurs-coach.com
Start
Date of Wednesday 10th November 2010 for the latest Entrepreneur's
Academy Programme
Are you a small
business which doesn't want to stay small.
Findout more by
visiting:
ww.the-entrepreneurs-coach.com
Grow your business and
increase your profits by answering 100 key questions to analyse
your business.
Then based on your answers a bespoke
report, unique to your business will be delivered to your
inbox.
The report contains over 80 profit
making strategies for you to implement into your business at your
leisure.
All
this in just 15 minutes:
|
Free Membership to the Entrepreneur's Coach
Website
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