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What Should You Do If Your Business Is Losing Money

If your business is losing money, you have a situation that can’t be sustained indefinitely. The clock is ticking and, unless changes are made, your business will fail.

The Cash Burn

In the days of the dot.com bubble in the late 1990s, a new measure became the rage called the cash burn, measured in months.

This was the number of months the business could continue to trade as it currently was, before it ran out of cash.

This was simply the amount of funding available divided by the monthly cash outflow.

If there was £80,000 in the bank and the business was using £20,000 of it a month, the cash burn was 4 months. If nothing changed, then the following month, it would be three months as the cash would have dropped by £20,000.

This meant that an end date could be calculated. If your cash burn at the end of April was 4 months, then everything was over by the end of August unless:

a) the net cash used changed for the better;

b) more money was invested into the business to give it an extended life.

It’s simple arithmetic that halving the burn rate, from £20,000 to £10,000 per month extended the life of the business. The £80,000 = 4 months became 8 months and that gave much more time for bright ideas to be thought about, implemented and improved before the crunch.

The Break Even Point

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The best business advisors and coaches will tailor the advice given to business owners depending on the particular situation and the needs of the business owner.

Basically there are two options:

  1. The advisor or coach has a well defined process and the client is expected to bend to fit in with the process. As far as the coach is concerned “it’s my way or the highway”. This is perhaps best typified by the traditional approach taken by E-Myth coaches where the entire process is so systematised that it can be delivered by inexperienced people with few qualifications. The system is everything and, therefore, deviating from the system isn’t allowed although there are some choices allowed within it. Michael Gerber has made a great virtue of this turnkey system in the past as he created the McDonald’s of small business consulting and put his ideas into practice. Please note, I don’t know if the E-Myth coaches still work in such a regimented style. I feel it’s also an approach that you can expect from many of the advice based franchises since their strength is in the franchise system and the way to protect their reputation is by making sure that the system is followed closely.
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  2. The advisor or coach is well qualified and has plenty of experience and is ability to adapt to the individual needs of the business owner. It would be wrong to say that there isn’t an underlying process, approach or body of knowledge but the focus is on the client. Here the emphasis is on the skills of the advisor and not the system.

I don’t think you’ll find it hard to work out which camp I fit into.

I very much believe that advice should be tailored to the business and the business owner. Change is hard and, as far as I’m concerned, it doesn’t make sense to put unnecessary obstacles in the way.

I have a natural affinity to Theory Of Constraints (TOC) style thinking. What is the biggest thing holding back the business? How can we fix it or at least maximise the current potential? When that’s done, what’s the next biggest constraint?

It’s about aiming to deliver change and improved results quickly. To identify where the low hanging fruit are and then to pick them.

That’s not to say that I don’t think there aren’t advantages in starting at A and gradually moving through in sequence to Z. If a business owner wants to make a radical overhaul of the business and there is no urgent need to get something fixed, starting at the beginning is usually the most efficient way.

Years ago, I developed a coaching approach I called the Eight Pillars Of Business Prosperity which looked at every aspect of your business.

In the ideal world, I liked to start with Pillar 1 which was about establishing your critical numbers or key performance indicators (KPI). As far as I was concerned, this area is under-developed in many small businesses and it helped us to find out where a business was and we could identify an initial set of benchmarks that allowed us to monitor progress.

However if a client had a major customer service problem, it made sense to jump straight into Pillar 7 (about your team of employees and suppliers) and Pillar 8 (the systems and processes in the business). I’d still want to set and monitor some KPI for customer service at the beginning but we wouldn’t worry about all the other aspects of the business until we could see real progress on the customer service issues.

Getting Advice From Me

I no longer offer the full Eight Pillars coaching because it was killing me to keep up-to-date with the latest ideas in all the different areas.

However, I offer a free 60 minutes consultation to business owners in the UK which I call a Business SOS. Together we’ll look at your particular problem and I’ll give you help and guidance if I can without any obligation or expectation that you’ll become a client.

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The Three Ways To Grow A Business

The Three Ways To Grow A Business Model is one of the most useful ways for thinking through the options you have to increase the sales value of your business.

It has been made famous by American marketing legend Jay Abraham although I’m not sure he can claim to have invented it as it arises from the arithmetic within a business.

The Three Ways To Grow A Business

The three ways to grow a business are:

  • Increase the number of customers who buy.
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  • Increase the average sales transaction value.
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  • Increase the number of times a customer buys.

Often when people think about growing the top line, the automatic focus is targeted towards winning more customers (method 1) and little attention is given to getting more sales from the existing customers in terms of selling more and more often. [click to continue…]

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I offer business owners based in the UK, a free Business SOS consultation if they feel they or their business is stuck or struggling.

The Business SOS Offer

This is a 60 minutes conversation that can be on the telephone although I’d prefer to do it over Skype because it means that we can share screens.

We’ll have a look at your difficult issue together:

  • Have you made the correct diagnosis of the underlying problem?
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    This is harder than you might think because you’re too close to your business and too emotionally involved. If it’s a big problem, you’ll be desperate to find a solution which may mean that you snatch at the first reasonable solution that occurs to you or one that’s suggested to you by someone selling you something.
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  • Have you identified a solution that can fix the underlying problem?
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    Even if you’ve accurately identified the underlying causes, you may have too many or too few ideas about what to do to fix it. You need objective advice from an experienced professional. We all have blind-spots or things that we’re irrationally committed to until someone else identifies the flows in our logic.
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  • Have you implemented the solution effectively or do you need help and advice on how to do it?
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    It’s easy to say that you’ll do something but it’s much harder to actually do it. For example, did you think that a website was the answer to getting more sales before you learnt that you needed to understand about ways to get traffic to the website like search engine optimisation or pay per click strategies or social media? Or found that more visitors don’t turn into more sales or enquiries?

There’s no pressure to buy my services. I learnt a long time ago that I can only help people who really want to be helped.

The SOS stands for Second Opinion Service and that’s what it is. Just as you might go to see a second doctor if you don’t like the originally diagnosis or prescribed treatment, you can talk to me.

If my second opinion is the same as your first opinion, you may not like it but you’ll have more confidence that it’s correct.

If you’re in one of those businesses that make it hard for you to commit to spending an hour in a meeting, the Business SOS can also be done as an email service.

Check out the Business SOS offer.

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Adding Customer Value By Taking Something Away

In recent years, I haven’t done much blogging but I’m intending to get back into the habit of writing two or three articles a week, as well as continually to be a prolific business book reviewer on Amazon.co.uk.

I’ll be blogging in two places, here on my Business Development Advice website and also on my business strategy blog, Differentiate Your Business.

Last week I wrote an article on DYB that looked at adding customer value by taking away something taken for granted.

It was inspired by newspaper articles on the topic of naked house cleaning. Yes customers were paying £45 an hour to have (not surprisingly) a young woman clean their houses in the nude. And not surprisingly, most of the customers were men!. [click to continue…]

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I have identified a tightly defined business library that’s suitable for entrepreneurs and business owners.

The list will keep developing as I find new books I don’t think a business owner should be without but I don’t want the list to exceed twelve books so I’m going to get to the stage where putting a new book in means taking an old favourite out. If you need helping applying the ideas, it may be time for a complimentary Business SOS.

I’ve read and reviewed hundreds of business books and you can discover the full list at Business Book Reviews including the ratings up to 5 Stars.

The Twelve Best Business Books For Business Owners & Entrepreneurs

These are the twelve books I currently recommend most strongly. Below the list, I explain why the books are included. The links take you to reviews on this website and not to Amazon.com or Amazon.co.uk.

  1. The E-Myth Revisited by Michael Gerber – *****
  2. Getting Everything You Can Out Of All You’ve Got by Jay Abraham – *****
  3. The Genghis Khan Guide to Business by Brian Charles John Warnes – *****
  4. The Ultimate Sales Machine by Chet Holmes – *****
  5. Duct Tape Marketing by John Jantsch – *****
  6. The Brain Audit By Sean D’Souza – *****
  7. Blue Ocean Strategy by W Chan Kim and Renee A Mauborgne – *****
  8. The One Minute Manager by Ken Blanchard & Spencer Johnson – *****
  9. Profits Aren’t Everything They’re the Only Thing by George Cloutier – *****
  10. Forget the Urgent!: Rather Focus On The Important by Matias Birrell and Javier Arevalo – *****
  11. TBA – a book about what I call the “inner game” of the business owner, my provisional choice is Think And Grow Rich by Napoleon Hill.
  12. TBA – a book about clearer thinking and better decision making. My provisional choice is Thinking Smarter by Michael Kallett.

You can get these from Amazon.com or Amazon.co.uk

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This is a book about the Theory of Constraints developed by Eliyahu Goldratt and popularised in his first book The Goal. Like that great book, this is a novel although it’s really like listening in to a series of coaching calls between a manager and his coach.

***** Five Stars

Who Should Read This Book?

  • Anyone interested in the Theory of Constraints.
  • Small business owners who want to improve.

The Big Idea

Every business faces constraints unless it is able to generate an infinite amount of money.

The constraint may be:

  • In the business. The classic example is a bottleneck machine in a factory that can’t process everything needed.
  • Outside the business but in the market. In this situation, the constraint to making more money and building a more sustainable business lies in the marketplace.
  • It can also be the business owner.

Review Of Forget the Urgent! Rather Focus On The Important

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If your business is stuck and your performance has stalled in terms of sales and profit, or worse if things have turned down, you need to take action.

The first thing to ask is…

Do You Know Why Your Business Is Stuck?

In detail? Meaning you have identified specific causes?

Or have you made an assumption based on gut instinct. If so, beware. These attributions are often wrong.

Do You Know What To Do And How To Do It?

For change to happen, you need three things:

  • To know what to do.
  • To know how to do it.
  • To have the commitment to take the necessary actions.

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Right from the start of my career, I’ve been fascinated by the idea of helping turn around businesses in trouble. When I was being interviewed as a trainee accountant in 1981, I expressed interest in the firms’ business recovery departments.

My career as an employee had its share of highs and lows. I was seconded to a start-up company in a group and had the true “cradle-to-grave” experience as I eventually closed it and sold off the assets. I was also the Finance Director of a business that found itself caught in a savage price war and I’ve never seen profit drain away from a business so quickly.

When I had to write a dissertation for my MBA, it seemed obvious to choose a topic that looked at how small businesses in financial difficulty might be rescued before collapse. It involved extensive research into the causes of failure and how businesses can achieve turnaround and I really threw myself into it. So much so that I had to ask for a six month extension. When finished, the dissertation was received a Grade A Distinction, which meant it qualified to be permanently bound and placed into the Manchester Business School library.

I’m telling you this because one of the interesting things thrown up by my research was the issue of causal attribution and how business managers and owners deceived themselves, at the risk of the future survival of the business.

Let’s have a look at what I discovered. [click to continue…]

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When you have a problem as a business owner, it’s very easy to feel unsure about what you need to do next to improve your business.

You feel stuck (see symptoms of being stuck) and it’s hard to get unstuck on your own.

Quite simply, you’re too close to see things objectively.

This makes it hard to move from the symptoms to the underlying problem so the temptation is to try to cure the symptoms again and again.

It’s like playing whack-a-mole.

An irritating symptom appears and you know you have to do something. So you do but another problem has appeared somewhere else, perhaps as a direct consequence of what you’ve just done.

It may happen again and again. Your motivation to deal with the symptoms reduces but you have this nagging fear in your head that you’re not doing things right.

Pressure builds both in your business and in you. It’s a combustible combination.

But it can be avoidable.

When I work with a client and give them advice, one of the nicest things I like to hear them say is…

“That’s so obvious. Why didn’t I think of that?”

The best ideas are often simple, easily understood and easy to make the commitment to implement.

The answer to the “why they didn’t think of it but I did” question lies partly in my broad knowledge, experience and problem solving techniques and partly because it’s much easier to look at other people’s business problem than it is to look at your own business and see the issues clearly.

Because I’m new to the situation and not emotionally involved, I can more easily see what’s happening and find the solution .

How To Get Unstuck

To get unstuck, you need to see the problem and the possible solutions through fresh eyes to get fresh thinking and to find breakthrough ideas.

This process starts best with an email to me at paul@plancs.co.uk to ask for a Business SOS.

Please tell me about your situation, issue or problem so that I can prepare properly in advance or tell you if I feel that I’m not the person you need. That way, you will get the best that I can give and, if I don’t think I can help, I won’t waste your time.

By working together, combining your knowledge of your trade, profession or industry and my business skills, we can stop you feeling stuck and unsure.

I look forward to hearing from you. All you need to do is to email me at paul@plancs.co.uk and tell me a bit about your business and why you feel stuck.

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