If you’re a business owner, it won’t have taken long for you to appreciate why there is so much talk about the importance of cash flow in any business start-up books you may have read.
>>> Why Cash And Cash Flow Are Important
You’ll have found that it is easy to spend money but much more difficult to make sales and to collect the cash when it’s due to be paid.
In this article I’m going to look at:
This is the first in a series of detailed articles about mistakes made in strategic planning.
>>> 8 Common Mistakes In Strategic Planning And Development
We will look at how strategy and tactics fit together and must be used together if a business is going to achieve its vision or strategic objective.
>>> Your Strategic Objective – Design Your Business To Be Right For You
and you as the business owner are going to achieve your big objectives.
>>> Your Primary Aim Answers The Big Questions In Your Life
Let’s start with some definitions because these two word are often confused. In particular tactics are often mistaken for strategy. [continue reading…]
You are the owner of a business and you’re worried about how it is performing. Things aren’t going right but with some luck, they might get better.
When is it time to call in a Profit Expert?
When is the right and best time to ask for external help?
In his book “Red To Black in 30 Days”, Allen Bostrom has this definition for a profit expert… [continue reading…]
Every business should know where it is going and, if it is big enough to have a senior management team rather than one dominant entrepreneur and owner, that usually means putting together a strategic plan.
Preparing a plan does not guarantee that it will be fit for purpose and in another article I look at the common mistakes.
>>> Common Mistakes In Strategic Planning And Development
The problems of strategy failure don’t stop at the risk of creating a bad plan.
A good plan won’t be worth anything if it isn’t implemented.
This is where it does get more difficult since you have to provide leadership to get your staff, customers and suppliers to take action. [continue reading…]
“The Goal: A Process of Ongoing Improvement” is a fantastic book about performance improvement in a manufacturing business wrapped up in a novel that is hard to put down.
First published in 1984 this book introduced the world to the Theory of Constraints.
The big idea is that many of the ideas for improving a business are misguided at best and expensive mistakes at worst.
That’s because an improvement in an area outside of the constraint that is holding back performance is more an illusion than substance. Real improvements come from removing the constraint.
I think this was the first popular management book to be written as a story but it is an extremely effective teaching method for putting across the big ideas. The weakness is that it’s hard to pick up the details to put the ideas into action. Eli Goldratt wrote The Race as the follow-up hands-on guide. [continue reading…]
Businesses are encouraged to spend time developing a business strategy for how they will compete profitably.
I am a believer but I will also accept that businesses with a time intensive strategic plan can also have performance problems and ultimately fail.
I also believe that every business has a strategy because if there is one from formal planning, one emerges from the decisions, actions and behaviours of the senior management.
The strategy problem can be split into two:
If you’re frustrated or disappointed with the way your small business is performing, it is time to improve it by solving the problems and constraints at source.
The good news is that by reading this article after searching the Internet and landing on my blog, it shows that you’re getting ready to make the changes you need to make your business profitable with a positive cash flow.
Admitting to yourself that you have a problem which needs to be solved is a big step in itself and, of course, it is the first vital step to finding a solution.
That puts you well ahead of the many owners who suffer from the day-to-day grind of keeping their businesses alive but for some strange reason, aren’t prepared to do anything about it.
I’d like to offer you a FREE coaching / mentoring or advice session on the telephone or Skype that lasts for about 60 minutes – I call it my Second Opinion Session (click on the link) and the acronym SOS seems very appropriate if you feel it’s time to call for help.
Remember, you’re not on your own. Just about every business owner has problems and you might like to take part in the one question survey I have on my website, asking you to identify your biggest problem anonymously >>> What Is The Biggest Problem You Have? (click on link)
Something is holding your business back and making it hard for you to have the success you want.
There is a famous saying… [continue reading…]
How intentional are you in the planning and managing of your business?
I see a number of different approaches taken to business planning by business owners:
Intentional business planning means starting with what you want to achieve and working backwards, challenging yourself on how you can do it.
In the last few days I have introduced this idea of intention business planning in two articles:
How To Target Your Ideal Profit
How To Target Your Ideal Sales Value
In these, you start with what you want to achieve and you work backwards through your key performance measures to reveal what you need to do to achieve the plan.
I’ve written and talked many times about the best idea in the famous book The E Myth Revisited by Michael Gerber is the concept that you must manage your business intentionally.
If you don’t, it will manage you.
Instead of the business working for you, you find yourself trapped working for the business.
And it’s an extremely hard, tough and demanding taskmaster that is never satisfied with what you do.
According to the E Myth approach and I completely agree, managing your business starts with deciding:
If you need a salaries and benefits package of £200,000 p.a. to live the life you want, how are you going to design a business to deliver that money?
On this topic, you might want to read How Much Should You Pay Yourself As The Business Owner?
When you manage intentionally, you’re very clear about what you want to achieve. You’re not accepting whatever the world throws out you.
You get there through intentional business planning.
You work backwards from the profit you want via the sales (and contribution) targets that means your business has to deliver all the way back to the real drivers of your business performance.
When you’re clear about how many qualified customer leads you need each week, you will look at your marketing in a very different way.
It stops being a “spend and hope” activity and starts to be an “intentionally plan, action and expect” activity.
Again, the intention of starting with what you want to make happen and working backwards to how you can make it happen is the thing I find most appealing about the Seven Sentence Guerrilla Marketing Plan.
What Will Happen In Your Business If You Don’t Make Changes?
Your business will have a momentum at the moment. Change is always happening.
It may be positive with your sales revenue and profits increasing month of month because of your existing marketing.
It may be negative because you’re losing customers faster than you’re gaining them or prices are being forced down because your products are struggling to compete because there is a price war in progress because of the difficulties of trading in the recession.
I encourage you to identify these trends and project your business performance based on these trends.
If you’ve done your intentional business plan and your trend projection, you will have two financial forecasts for your business.
The first is what you want to happen.
The second is what is likely to happen if you don’t make changes.
The difference is the gap and working out how you can close the gap by taking specific actions is called gap analysis.
If your business already has momentum moving in the direction you want, the gap may be comfortingly small.
A few tweaks and minor improvements in what you do and how you do it may mean that you can close the gap easily and you’ll reach the “business of your dreams” sooner than you thought.
Just don’t be too complacent.
You need to be clear about your critical success factors and key performance indicators so that you can monitor your business and make sure that improvements are happening as expected.
However, if the trends indicate that your business is going backwards, the gap between what you want and what it looks as if you’ll have can be frighteningly large.
This exercise can be a real wake-up call.
Although you may get stressed, be comforted by the idea that you’ve been altered to the problem early and you can take the actions needed to turn around your business.
Start brainstorming how the gap can be closed. Get your team involved.
Record as many ideas as you can before you make any kind of critical assessment.
Some ideas may sound crazy as soon as you hear them (or they spring into your own mind) but one of these might be the springboard for some genuine innovation.
Then go through and assess the better ideas. Get your team members to select their ten favourites and pool votes to see which have the most support.
Eventually you will build up a series of action items that will help you to close the financial gap.
You can prioritise based on the return on investment or return on time. I’d choose whichever is your biggest constraint.
If you’re always short of time, then you need to make sure that your time is spent on the most productive activities. If money is a problem, then you need to focus on the return on investment.
What If You Can’t Close The Gap?
The idea of using gap analysis and identifying the actions needed to close the gap is very logical but you may struggle to think of enough things to do to close the gap.
That may be because you haven’t made a realistic enough assessment of your business issues and problems.
Read 21 Reasons Why Your Business Isn’t As Successful As You Want It To Be
Alternatively you might need some help to close the gap.
I can think of three approaches:
Starting a business is one of the most exciting things you will do in your life.
If you think back to when you first started, your mind was full of opportunities and possibilities.
You had a clear and compelling purpose.
Little else mattered.
That purpose (perhaps even a calling) inspired you to work crazy hours, up to seven days each week.
And when you weren’t working in your business, you were thinking about it.
Do you remember how good that felt?
But Now…
If you’ve lost your mojo for your business, then it’s a drag.
It’s no longer an exciting dream but a frustrating nightmare.
You thought you’d have a business you love.
Instead, you’ve finished up with a business you hate.
Or perhaps it’s worse than that.
You’re indifferent.
The passion has gone.
The Three Big Reasons Why You Have Lost Your Mojo
Let’s take a look at these reasons for losing your mojo in more detail.
Your Health Threatens Your Business
I’ve certainly been there.
I came back from holiday in May 2010 and told my mastermind partners that I’d lost my mojo for my business while I was away. The effort of having a good (but relaxing) time had totally drained me.
I remember vividly saying “I’ve lost my mojo” when a few weeks before I had been so positive after recovering from a previous health problem.
A couple of months later I was sitting in front of a respiratory consultant with an appointment arranged a week after a chest X-Ray. My file was marked on the front in big letters written with a black marker pen “VERY, VERY URGENT.”
That focused the mind I can tell you. As did the consultant forcing me onto his list for bronchoscopy procedures the next day, despite the department telling his secretary that the list was full. It wasn’t the suspected advanced lung cancer than goodness but it was the start of my vasculitis.
Several months later I was sitting in front of the consultant again, and he said that it looked as if the disease had started to attack my kidneys. Two days later I was in intensive care with acute kidney failure.
The disease, which would have killed me in a few months is now in remission. The symptoms are largely under control although I have to live with the effects every day.
Something like this can suddenly strike any business owner. Hopefully not you but it is best to look after your health and to be prepared.
If you have a health problem, struggling with a business on the edge could push both the business and you into much more serious difficulties.
You Have Serious Family Problems
Sometimes you have to accept the work is a secondary priority. Some things really are more important.
Again I’ve been there.
In recent years, my partner (I wish I could think of a better phrase for ‘er indoors) has hopefully recovered from cancer and my father has died from it. Both times, my business had to take a back set.
I believe you work to live and not live to work.
When I’ve talked to insolvency practitioners, they often find that relationship difficulties and other family problems lie behind some business failures they see.
You need to create a robust business in the good times, so that, if your personal life ever hits the rocks, your business doesn’t.
You also need to invest in your relationships while you can. Remember the saying “All work and no play makes Jack a dull boy.”
I bet one of the reasons you started your own business was to take better care of your family and to give them things that you couldn’t as an employee of another business. It doesn’t make sense if you don’t have quality time with the people who matter most to you.
You Have Lost Your Purpose
This is the most common reason why a business owner loses his or her mojo for the business.
The struggles of surviving drive out of your mind the reasons why you started a business in the first place.
If you think back, you were energised by one or both of:
Probably the best idea from the famous book, The E Myth Revisited is the principle that your business needs to be designed to give you the life you want.
In the book, Michael Gerber explains the idea of your Primary Aim. This is the powerful and visionary statement that describes what your life is all about including how you want to be remembered with your legacy.
Your Strategic Objective defines the deal you have with your business. It explains why your business is an opportunity worth pursuing and committing your time to build.
I’m very clear that the purpose of a business is to create value for customers and the business owner(s). If you lose sight of that, you will run into problems.
Lock yourself away for an hour on your own with a pen and a blank sheet of paper or two.
I want you to find your motivation for your business again.
I want you to get clear on:
A successful business means that you do great things for both your customers and for your family (and yourself).
Get emotional.
Get committed.
Find your business mojo.
21 Reasons Why Your Business Isn’t As Successful As You Want It To Be
This is the first of a series of articles I’m writing to look at the major causes for poor profitability in an indecently owned business.
21 Reasons Why Your Business Isn’t As Successful As You Want It To Be
If you are frustrated and disappointed with the way your business is performing, let me reassure you that you’re not on your own.
But where you’ve taken a big positive first step is that you’ve decided to investigate the underlying causes why your business isn’t generating large profits and generous cash flows consistently each month.
That puts you well ahead of the game compared to the thousands, perhaps millions of business owners who accept their lot and suffer in silence with a business that under-performs.
My Role In Helping You To Find The Causes For Why Your Business Is Struggling
I want to help you to diagnose the problems that are holding your business back and to guide you to the right solutions.
I’m going to have to be blunt.
If I sugar-coat my words, they may pass over you and that means this opportunity will be missed.
The Three Big Causes For A Business To Struggle
The problem may lie principally in one of those areas or it may ripple through all three.
For You To Make Changes That Improve Your Business You Need To Have (Some) Control
There are two types of people.
The economy sucks. You can let it drag you down or you can do something about it.
Fortunately the big difference between business owners / entrepreneurs and the rest of the working population, is that many employees are stuck with a victim-mentality and have things happen to them with little control.
Business owners generally believe they can make things happen.
They often have a positive mindset that, even in adversity, there is an opportunity to be found and exploited.
I hope you have a positive mindset too.
If not, you might want to stop reading because this is going to be a tough ride.
However if you’re an action taker determined to be in control of your own destiny, I believe you’re going to get great insight from what follows.
Why I Start With You
This may feel like a personal attack but it’s much too easy to blame the wretched economy and to use it as an excuse for poor performance.
Bear with me, I mean well.
The reason I want to get you to face some hard facts about yourself and how you are working is that these issues are the easiest to correct.
If the problem lies inside you, you can fix it and provided you keep disciplined, your business improves.
If the problem lies within your business, the span of what you have to control increases (the strategy, the systems and processes, the products and services, the people) and the level of control reduces.
It’s your business. You can make things happen but it’s harder to change than it is to change you.
If the problem lies within the market, there are more players to influence (customers, direct and indirect competitors) and you have less control. In terms of overall market demand, you may have negligible influence so you have to try to increase your market share without causing too many problems with competitors.
Section 1 – How Are You Holding Back Your Business And Causing It To Struggle?
It’s unlikely that all of these issues will apply to you but some might.
Read the question out loud.
Try to answer each one honestly, as if you’re talking to your husband or wife, your best friend or to a therapist or counsellor.
It’s a good idea to get a piece of paper and write the numbers 1 to 21 down along the side. Then make your own assessment – perhaps graded into:
1 – often a big problem
2 – sometimes a problem
3 – not usually a problem
4 – never a problem
1 – Have You Lost Your Mojo For Your Business?
Have you stopped being excited when you wake up in the morning and think about your work?
>>>> What If I’ve Lost My Mojo For My Business?
2 – Have You Stopped Working And THINKING Hard Enough?
This is a contentious point because I know many business owners work extremely long hours. However there is much more to working hard than time spent “doing stuff”. Have you heard of the 80/20 Rule? How well are you focused on the 20% of activities that generate 80% of your results?
Success comes down to a few things
These have feedback loops between them. How you feel depends on what you think, do and achieve but also impacts on what you think, do and achieve.
3 – Are You Unclear On Your Goals And Priorities?
Having a clear purpose for your business is great news but it’s extremely hard to move from such a big vision down to the activities you do on an hour-by-hour basis without setting goals and objectives, deciding priorities and, yes, having a plan.
4 – Are You Poor At Controlling How You Use Your Time?
Are you clear that you make the highest and best use of your time while you are working? Or do you find that you waste too much of it and, when you look back at the end of the day, you find yourself wondering what you did and what you achieved?
5 – Are You Bad At Working To Your Strengths And Delegating Activities Linked To Your Weaknesses
As humans, none of us are perfect. We have strengths and weaknesses and we should recognise and accept them.
Much more gets achieved when people do what they’re good at and enjoy doing. Too many business owners spend too long doing low value activities that no one in their right minds would pay them to do.
6 – Do You Feel Lonely And Isolated With No One To Bounce Ideas Off?
Being the owner and main decision maker in a business can e a very lonely place and especially if the business is struggling and tough decisions need to be made.
7 – Do You Start Many More Projects Than You Finish?
Many business owners and entrepreneurs are creative ideas people. They jump from one great idea to another but move on before finishing the last. Unfortunately this is a great way to spend a lot of time, energy and money while achieving very little.
8 – Have You Become Complacent About Why Your Business Has Been A Success In The Past And In Denial Of The Current Situation?
It has been recognised that instead of success breeding more success, it can often lead to decline and failure. That’s because people are reluctant to make changes to something that has worked and although the market is sending signals, they are excused as blips.
Complacency about the future prospects of the business can easily lead to denial as problems increase and profitabilty gradually reduces, even to the stage where the business is incurring losses.
Section 2 – The Core Business Issues That Are Causing Difficulties
I’ve got no intention of letting you off the hook now that we’ve moved from you to your business.
As the business owner, you are responsible for everything that happens in your business.
If your sales revenue is too low, it is your fault.
If there isn’t enough money in the bank to meet the next payroll, it is your fault.
If your employees are driving you crazy, it is your fault.
Remember that accepting responsibility is empowering because it means that you can make changes to create improvements. In fact, it is your responsibility to create a successful business that gives certainty and stability to your family, your customers, your employees and everyone else connected with your business.
9 – Are Your Products And Services Seen As A Commodity By Customers Because Your Business Is Not Differentiated?
This reason for poor performance is my particular hobby horse and is of vital importance.
If your business isn’t different from the competition, then unless your operate in a market where demand far exceeds supply, your business has little reason for its existence.
Harsh I know but if you can’t bring some kind of unique value and satisfaction to customers, why should they give you any kind of attention, let alone buy from you?
10 – Does Your Business Lack Competitive, Value For Money Offers?
This is a reminder that while people may love (or hate) businesses, they buy particular product or service offerings.
I’d love an Aston Martin car, they don’t make one that’s right for me and certainly not at a price that I’d be willing to pay.
11 – Do You Struggle To Attract Enough Enquiries From Prospective Customers?
As I make clear in the Six Steps Profit Formula report, even when you have a great offer, it needs to be wrapped up in a compelling promise and you need to get it in front of the eyes and ears of your target market.
12 – Do You Find It Hard To Convert Enough Enquiries Into Paying Customers?
You don’t get paid on leads. In fact it is often an expensive process to convert leads into customers and considerable money can be wasted if too large a proportion of sales opportunities are lost.
13 – Are Many Customers Disappointed With Your Product or Service After Buying And Don’t Keep Buying?
It’s one thing to create a customer. It’s another to keep one and turn it into a long term profitable relationship.
14 – Do You Lack Follow-Up Products And Services To Sell After The Customer Buys The First Time?
Even if you provide a great service and receive plaudits for your customer satisfaction, your business may not be able to profit from the goodwill created if you can’t offer extra products and services.
15 – Are Your Operating Costs Too High For The Prices You Have To Sell At?
The market and your ability to influenced perceived value will determine the upper limit of the prices you sell at but your profitability depends on your costs to buy, create and deliver the products and the costs to service the customer.
A great business can be ruined by poor cost control, inefficiencies and low productivity.
16 – Do You Have Poor Quality, Untrained And/Or Unmotivated Staff?
If your employees aren’t up to it, your business will never take proper advantage of the opportunity for profit available from the market. There may be recruitment, management or leadership issues that need to be tackled urgently.
17 – Does Your Business Not Work Very Well When You Are Not There?
Having good people is a great start but they won’t produce great performance if the systems and processes are not properly designed and fit for purpose.
Great systems mean that your business delivers consistently high quality whether you are there to oversee operations or away.
Section 3 – Business Difficulties Are Coming From Outside Of The Business
If you’ve gone through the first two sections about your performance as the business owner and driver force or your business and about the business itself, but haven’t found much to fix, then the problem lies within the market.
18 – Is The Market In Long Term, Permanent Decline?
In this situation, you face a big strategic issue. Do you leave this market and look for other opportunities or do you aim to dominate the market that’s left?
19 – Is The Market In A Cyclical Decline That Should Bounce Back In The Long Term?
In this situation the business is dragged down by the market, but provided the business can hang on, demand will recover and better profitability will return. This is about managing the short term future while maintaining long term prospects.
20 – Is Your Market Extremely Competitive Where Prices Have Been Driven Down So Low, Profits Have Been Competed Away?
Some product markets suffer from crazy, suicidal competition with average selling prices forced down close to marginal cost levels. It’s easy to get into a price war that destroys the long term profit potential and permanently shifts the balance of power towards customers and away from suppliers.
21 – Is The Market Changing Quickly Or Facing A Potential Major Shift In The Way It Works?
Some markets go through a major change where the old rules of competition and their key success factors are overturned with a new way of working. The internet first changed the distribution channel for books, CDs and DVDs and is now making the physical products obsolete.
Has that happened to you or do you fear that it might happen?
How Did You Do?
There are twenty one major reasons why your business may not be as successful as you want it to be.
How many of the questions triggered alarms with you?
If you graded your answers on a sheet of paper, how did you score?
I’m not going to give you an overall rating. That’s not how this is intended to work.
Instead it’s meant to highlight the areas where you need to prioritise your attention.
What You Can Do About These Issues
I will be writing detailed articles about each of these issues to give your more guidance, outline options and share some practical tips.
If you feel you scored badly, I urge you to seek professional advice.
If you fear your business is already insolvent, you must take specialist advice quickly because the consequences are very serious if you continue to trade. In the UK for example, the protection of limited liability given by a limited company can be lifted and those responsible can be made personally liable for the debts.
If your business is struggling but without imminent risk of bankruptcy, it would be a good idea to:
Please don’t ignore the situation.
Only one of the issues above – the cyclical decline – is going to get better on its own and even then, it may take a very long time and your business may not be in a position to take advantage of any upturn.
Look out for the articles to appear on the detailed points. I will be putting links under the relevant questions to make it easy to find what you need to know.
I was a consultant, small business coach and advisor based in Birmingham, with over 35 years business experience, including more than 20 years as self employed.
My main business qualifications are:
– Chartered Accountant
– MBA
– Certified Guerilla Marketing Coach
My main interests are in helping business owners who are stuck get unstuck by thinking more clearly about their issues and possible solutions.
I no longer provide professional business coaching but I will be sharing more ideas on my blog and will continue my popular business book reviews.
I can be contacted by email at Paul@BusinessDevelopmentAdvice.com
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