Archive for category Finance

Five tips to Grow a Sustainable Small Business in 2017 and Beyond


Far too many small businesses fail within the first five years – so how do you make sure yours is
one of the success stories?
Here are 5 important tips to help you grow a sustainable small business.

  1. – Cash is king
    The number one reason SMEs go to the wall is that they run out of cash. So if you want to go to
    the distance, it’s crucial that you monitor your cashflow.
    Turnover does not equal profit – and profit on paper is meaningless if you can’t pay your bills
    when they fall due.
    There are lots of strategies you can use to boost your working capital, including:
    · Organising short-term finance like an overdraft or business credit card to cover
    · Controlling your stock levels to avoid tying up cash in excess inventor
    Shaun McGowan from business loans website Lend says “Business owners should consider
    using long-term finance instead of cash for asset purchases and always to negotiate with
    finance providers and creditors to match payments to your cashflow”.
  2. – Know your numbers
    To run a successful business, you must keep a close eye on your financial performance,
    including these key ratios:
    · Profitability – what percentage of each sale is profit, once you’ve covered variable costs
    like materials, transport and customer acquisition?
    · Breakeven point – how many sales do you need to make to cover your fixed costs?
    · Return on Capital Employed (ROCE) – this ratio (net profits/total assets) tells you how
    much return you are making on the money invested in your business. Compare this to
    how much you could make by investing that money elsewhere, to evaluate whether
    your business is profitable enough to compensate for your time and effort.
    Analyse your performance monthly, so you can spot problems early and take action to get back
    on track.
  3. – Value your people
    Your business is only as good as the people in your team.
    Fill any gaps in your skills with people who have those strengths – and who share your passion
    and vision. Treat them with respect, reward their efforts well, and harness their skills to make
    your business stronger.
  4. – Safeguard your reputation
    In today’s viral age, a bad review can spread like wildfire and permanently damage your
    The customer may not always be right – to be sustainable you need to pick your business
    relationships with care and work with profitable clients who pay on time – but the customer
    experience is vital.
    Build and maintain a loyal customer base by having strong core values, and acting with
    consistency and integrity at all times.
  5. – Grow with caution
    Not every opportunity will be worthwhile, so evaluate each new customer, sales channel or
    acquisition before you leap in.
    · Do you have the capacity to service a new customer without hiring more staff or
    investing in new infrastructure? If not, will the profits cover your additional fixed costs?
    · Will you still be able to provide the level of service upon which your reputation
    · Does the opportunity fit with your long-term plans and strategic direction?

Cautious, steady growth is the key to long-term success and sustainability.

The Analysis

Sales bags

Image courtesy of Idea go from

Your business has been going for a few years, things are settled to some degree and you have accumulated enough financial data to start making some planning sense out of the numbers.

You know the amount you take home isn’t much and you avoid talking about it hoping things will pick up but things are not improving. You note to yourself how easy it is to lose track of what you need to do, crunch the numbers. So get to it and start crunching!

What’s that? You don’t know what to look for, well try these pointers as a starting point.

  • How many sales per week – How many people bought something, then ask how many items on average did they buy? these figures can be useful, if you know that 200 people came into your shop for instance and only 20 of them bought, that might seem a sad number, however if 15 of those 20 purchased 10 items that might make a big difference, especially in a store with higher priced items.
  • The average dollar sale – How much did you average for each sale you made, e.g for each person who purchased, what is the average they pay? If the average is high and you notice the daily takings start off low, then it’s reasonable to expect the next few sales will be higher.

Using the above as starting points you can now see where you have to focus your attention, either you need to get more people in the door, or get more of those currently coming in to buy more. Let’s say 80% of people in the door currently buy, then you need to find ways to get the average dollar value spent to rise. If the percentage of purchases is low then you might need to get the number of visitors to rise. Having both rise would be a big bonus!

In an age where most people are keeping a close watch on their business figures due to having to comply to tax guidelines and most are using accounting software to do so then you can extract lots of data from most of these programs or at least export the raw data to put into a spreadsheet to get the reports you really need.

I have the data what now?

  • More customers – If you need more, then your marketing needs work. Can your ideal target market readily find you? Focus on these people in the best way possible to boost your numbers. What about the level of new customers coming in each week, do many of these people stay or move on, then perhaps the customer service side of the business needs work to retain more of the already existing numbers of prospective customers walking in.
  • Higher average dollar sales – Try up-selling, “Oh if you buy that do you need this as well?” the add ons can be the difference between make or break some times. Try raising your prices, perhaps your prices are already too low (you do research your competitors…Don’t you?)

To recap you either need to be getting more of the right people into the business to buy, or you need to up the value of the sales made. Now search in the rest of our resources to find ways to do just that.


Steve Gray

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The Numbers Folks, Remember The Numbers…

I attended a business seminar yesterday, more good information, the room was filled with people already in business and a few wanting to get started.

Image courtesy of Jannon028

Image courtesy of Janoon028

In the heap of material presented one thing really stood out. In the generally passive group, one thing got them to sit back and say ooh… and not in a good way.

The presenter posed some figures, “If you want to earn this much money you have to charge this much per hour…” then the slide revealed how much per hour for various amounts per year. “Ouch” came the response from a person near me…

The Presenter went on to say “Oh by the way this is just your wage we are talking about here, not thinking about the amount you need to cover your business operating costs…” OUCH! the Participants squirmed in their seats on that one.

Do the sums yourself sometime and make sure you leave out the days when you have sick days, weekends, holidays and so forth. You will soon come up with the right amount of  days you need to divide the  hours by.

The big challenge, although it was not mentioned at the event, is the threshold people are used to and how simple concepts like this can throw a persons perception out of the ball park. If you are used to charging $25 per hour, but find you need to be charging more like $250 per hour, then things need to change (yes a mind shift needs to take place).

I guess some people will say “Who would pay that much for anyones service, let alone for my services?” welcome to reality people, being in business is loaded with these sorts of challenges.


Regards Steve Gray

Discounting will kill business, you watch.

Lots of people love discounts, they love to get a bargain, unless of course they bought an item for full price last week and this week it’s at a discount rate.

The challenge with discounting from the business perspective is it means you have to sell more to make up for the margin you lost in discounting the price. If your competitors do it you might be tempted to do the same to try and retain customers and keep you r business afloat. It seems like a reasonable strategy until the bottom falls out of the market or things change (online shopping being one.)

Businesses face pressure internally if they can’t compete and most seem to end up following the discount route. Some will already have inflated prices and the discount ‘looks good’ but is no big deal to the business. For those without the ability to start with an inflated price they can soon end up in dire straits.

Then there are the business sectors where the competitiveness gets to be a real killer… “I can get a person to do this job for $10 less per hour than you are quoting.” before long it becomes a bluffing game. “May the person with the detailed written quote please stand up…” and if you are competing you would probably want to get the quote to make sure that what you are offering matches the other quote. “Apples aren’t apples if they’re oranges”

Discounting might seem to work for a while then it gets to a point where those who go down this route feel the pressure of lower income and before long may even go out of business as the margins vanish into thin air.

Manufacturing countries with cheap labour have fallen for the discounting trap, sure they may be able to offer lower labour rate than other countries, but some research on their behalf could have given them a clearer picture of where to pitch their prices. Alas they did not and simply grabbed what they could at the time, our buyers snapped up the bargains and now we have little margins and big turnover of product to try and make up for the slim margins.

A vicious circle ensues and before long the pendulum swings and a cheaper country emerges and pushes the other out. Business becomes cut throat again.

I guess there has to be some form of happy medium, where the price provides a reasonable margin for the business to keep going and thrive as opposed to a business on slim margins who might struggle to survive.

In the end good service and products should be the aim, with the quality is remembered long after the price is forgotten. However this seems to not be the case.  Businesses have to strive to be unique and do battle, hopefully without having to resort to discounting and the challenges this provides.

How to improve your credit score (infograph)

According to today’s visual infograph, the majority of American citizens have their personal credit under control (but perhaps only just). I imagine that the rest of the world are in a similar boat.

Relevant to all of us though, there are some tips to help you tame the credit beast, and get your credit back on track and working for you, instead of the other way around.

Via: Credit Card Education

Rushing headlong to “who knows where”.

Lately I have had a few reminders of what I am about to chat about. It’s a bit unnerving when people ask “When are you planning to retire?” and I answer with “I’ll never retire, I like work too much!” that covers the fact I probably won’t be able to retire financially. But I guess it makes light of a serious subject and one I have to try hard not to think about too much.

Like a lot of people I didn’t worry much about retirement, putting cash away and anyway I keep hearing stories of people losing money overnight on the stock market and their portfolio value plummets again…

The reminder for this post, listening to people in business chatter away about how things have gone, what they will do when the time comes to retire, how they might sell their asset and in one case a lady who had sold her business, watched it fade fast into obscurity so she bought it back and is building it up again.

So what will you do, sell the business, put a Manager in to run it, expand it, resize it etc? All with the aim of having a nest egg to retire on.

If you do sell, will what you have the cash ‘invested’ in provide for your needs in retirement? How much will you need?

If you build up the business and put in a Manager how will that work out? Will the amount you need to take out hurt the business? Will it be run as you set it up or better? Will things fall in a heap and you need to rescue it… will you want to rescue it!

Lots of great questions in need of great answers. Hopefully your Accountant can set you straight, or at worst your own figures will project a rosy future for you. Lets face it, in the current economic situation there is little to smile about when the notion of retirement looms large in our thoughts. Unless of course you have an asset which keeps on giving.

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Choosing the right franchise for you

Franchise opportunities abound, but choosing the right franchise requires careful thought and considered research.

Combing through franchise businesses for sale notices should be less daunting if you implement a well thought-out research strategy. Using online research, industry publications, news clippings and other methods is a great starting point.

When identifying franchise opportunities, consider what will complement your lifestyle, business goals and your skill set. Some aspects to consider are outlined below.

Brand strength? Behind every successful business is a strong brand, bolstered by an enviable reputation. Read widely about how the franchise brand is perceived by the industry, customers and business partners. Part of what you’re buying is the company’s brand equity. What do you estimate the brand’s equity to be?

Finding out about financial health How open and transparent is the organisation about its financial health? A company’s balance sheet can provide valuable insights about how well placed the franchise business is to harness future growth.

Expenses today and in the future Before you buy a franchise, you’ll need to know what set-up costs are involved. There could also be ongoing costs, such as marketing or advertising levies.

Strategic marketing, PR and advertising expertise? Dig deeper into the company’s marketing strategy. What level of investment and support is offered nationally and locally? What marketing and branding expertise does the company offer? How well resourced is the organisation to fund public relations programs?

Systems for success? Systems are essential ingredients in any successful franchise network. How efficient are the franchise’s systems and processes – do they help or hinder your ability to operate the business?

Investigate the level of support on the ground Do they have a dedicated operational and field support team to assist you? Investigate the ratio of franchisees to field support infrastructure.

Consider the commercial environment Determine the competitive dynamics that are likely to impact the brand. Do they have a well-defined understanding of their competitors, future opportunities, trends and issues?

Create a shortlist of franchise business opportunities? Once you’ve created your wish list, shortlist your most suitable franchise opportunities. Map out what works for you and what doesn’t, including the business must-haves e.g. IT and marketing support, costs (one-off and ongoing) and other forms of critical infrastructure.

Talk to franchise owners at the coalface Franchise owners are valuable resources. They can often provide you with the ‘inside story’ about a potential franchise business opportunity.


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