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Business Problems And Mistakes – Understand & Solve

The Theory Of Constraints For Small Businesses

The Theory of Constraints (TOC), as originally developed by Eliyahu Goldratt and introduced to the world in the business novel “The Goal“, has produced some remarkable successes in big companies, showing huge improvements in the three main measurements:

  1. More Throughput (T) – this is effectively increasing sales less the direct cost of sales without any questionable apportionment of shared costs.
  2. Lower Operating Expenses (OE) – reducing the other costs of the business.
  3. Lower Inventory and Investments (I) – reducing the money tied up in the business whilst also improving due date performance and cutting lead times.

This has been achieved by focusing improvement efforts on the main constraint or the weakest link in the chain. Quite simply, this is where you can get the biggest bang for your buck.

Just to be clear, a constraint is something that stops you from reaching your goal. For example, consistent customer service problems may stop a business from reaching its goal to increase profit. [continue reading…]

in Business Problems And Mistakes

What To Do If Your Business Is Stuck Or You Feel Stuck

First let’s look into the problem of being stuck as a business owner:

  • What does it mean if a business is stuck or of a business owner is stuck?
  • What are the symptoms of being stuck?
  • How does “being stuck” fit into the cycle of business growth and decline?
  • What can you do to move from being stuck to being unstuck?

What Does It Mean If A Business Is Stuck Or If A Business Owner Feels Stuck?

If a business is stuck, it means that it has lost its forward momentum:

  • The rate of growth in sales and profits has slowed down, stalled or perhaps even gone into a small decline.
  • It’s become harder to convince customers to buy because you’ve lost key factors of differentiation that gave you an edge over your competitors.
  • If you don’t get unstuck, your business is likely to go into decline and the future of your business may be threatened. The amount of time you have to take corrective action depends on the buffers you’ve built up in  terms of cash and reserves of profit and the rate of decline in cash and profit.

[continue reading…]

in Business Problems And Mistakes

I’ve had three people ask me how to sell (more) premium priced watches online.

This popularity is part of the problem. It appears to be an attractive market to be in from the seller’s perspective with an interesting product and a high transaction value. However some of the underlying issues make the opportunities for success very limited including how comparatively easy it is to set up a business selling watches online.

Winning The Watch Buyer’s Confidence & Trust

I can’t emphasise enough the importance of winning the buyer’s confidence and trust. Premium watches are an expensive purchase for most people and they have a natural fear that things may go wrong with the transaction. You know if you can be trusted (or not) but they don’t.

The easiest way to understand is for you to put yourself in a similar buying position where you are spending a few hundred pounds online. It doesn’t work so well if you’re using imaginary money but you may get part of the way there but you won’t have the risk of loss.

I’d try two types of products

– an unbranded item where you have uncertainty about the quality.

– a branded item, where, if genuine, the quality shouldn’t be an issue but where you have a nagging doubt on whether you can get a better deal for exactly the same item elsewhere.

This will give you a feel for something I call the buy / don’t buy scales. It helps you to weigh up the issues that encourage someone to buy and the concerns that hold back the purchase decision. [continue reading…]

in Business Problems And Mistakes

I Want A Shop – How Do I Start A Retail Business?

I received an email from someone who wanted to own a shop but she didn’t know how to start a retail business.

I thought this was a common enough problem to make it worth blogging about my advice.

The lady who asked the question already knew what type of shop she wanted. If you’re a budding retail entrepreneur but you’re not sure about what to sell, you need to decide the broad category first.

General Thoughts About Retail Businesses

Setting up a business can be a great idea but it can also be a way of losing a lot of money, especially in retail.

I feel that the first thing you both need to do is to read two or three books about retailing and what makes one shop successful whilst others struggle.

Here is a link to amazon.co.uk or amazon.com for retail books in the business section.

As well as learning more about how to start and manage a shop, I think several aspects are particularly important. [continue reading…]

in 3 – Your Strategic Positioning, Business Problems And Mistakes

From time to time, a business owner will contact me and ask for a free Business SOS because their business has cash flow difficulties.

The first issue we face is the problem of diagnosis. A business may be experiencing cash flow problems for a number of different reasons and curing the problem for the long term means getting to the root cause.

Cash flow difficulties normally mean that the business is struggling:

  • To pay suppliers when they chase for their money after selling on credit, or
  • When another supplier insists on payment on order or delivery and no money means no goods, or
  • When the business owner is struggling to find the money to meet the weekly or monthly payroll, or
  • When  the business can’t meet a periodic payment like the quarterly rent or VAT, or
  • When the business owner wants to take money out of the business for personal use and the money isn’t there.

The Causes Of Cash Flow Problems

[continue reading…]

in 1 – Your KPI, Business Problems And Mistakes

My Business Is About To Fail, What Should I Do?

I’m sorry to hear about the serious problems with your business.

The big question with any struggling business is whether you are in the early stage of decline or whether problems have been going on for some time and have used all or virtually all of your spare cash in the business together with any money you can invest or lend to the business.

From your query, it sounds like the second so turnaround options are probably not available.

In that case you may have to follow an insolvency procedure.

This depends on the legal form of the business in the UK. [continue reading…]

in Business Problems And Mistakes

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

[continue reading…]

in Business Problems And Mistakes

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.
  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.

[continue reading…]

in Business Problems And Mistakes

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

The Business SOS Offer

This is a 90 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. [continue reading…]

in Business Problems And Mistakes

Recession-Proof by Jason Schenker

The full title of this book by Jason Schenker is “Recession-Proof: How to Survive and Thrive in an Economic Downturn“.

In my review at Amazon.co.uk. I gave it Four Stars. This means I consider it to be good to very good.

Here is my review.

A personal guide to surviving a recession

I was attracted by the title of the book and assumed it was targeted at small business owners but I was wrong. It’s a personal guide for individuals – people in work, students and parents.

It presents six strategies: [continue reading…]

in Business Problems And Mistakes, The Next Economic Crash