If your doctor told you you had heart disease or diabetes you would immediately take steps to make yourself stronger and healthier.
If your doctor told you you had heart disease or diabetes you would immediately take steps to make yourself stronger and healthier.
Your business is no different and there are a number of businesses out there that are either critical or not feeling at all well.
Try these 10 steps to ensure your business remains fit and healthy.
Management information
The first step to understanding the health of your business is to have good quality, timely financial data. Without it you are blind and can only assume all is well.
Invest in a good accounting package or hire a company that can provide the services without the need for an investment from you.
Make sure it has the capacity to produce meaningful reports that you can use to manage the profitability of your business.
Lease negotiation
For those of you in shopping centres you understand what it is to pay rent, and pay and pay. But take heart, there are signs commercial rents are falling in Western Australia and the rest of the country.
Clearly, leasing managers are not going to offer reductions if they are not approached. It is up to you, the owner, to make your case and suggest that, given the support you have shown to the centre, that maybe they could show some support for you.
Retail sales are down, there are fewer shoppers and, in many cases, the average spend per customer is down.
Interest rates
There is an increasing level of activity from financiers trying to lend money to small and medium-sized businesses. Borrowing costs are a major factor for businesses, so you must negotiate hard to achieve the best outcome.
Trading terms
Suppliers have been reducing the trading terms they offer in an effort to lift their bottom-line performance and better manage their cash flows.
Whether it is the discounts you receive or the time within which you have to pay, all this will affect the trading performance of your business.
You must negotiate hard and, if you are still having difficulty, maybe it’s time to become part of a buying group.
Pricing policy
Are you a discounter, full-service business or a hybrid? When you understand your niche you can move towards a real pricing policy.
You need to understand the price point at which your customers decide to buy or not buy your products. Discounting will only work if you sell sufficient volumes to offset the drop in profits.
High gearing
A business can only service a finite amount of debt. Write down all your assets and all your debts, including all credit cards, overdrafts, store credits and extended terms. Then calculate how much each year it costs in interest and repayments. When you compare this to your profit you will know if your gearing levels are too high.
Working in your business
It is hard to believe but a number of business owners rarely, if ever work in their own business.
This may be fair and reasonable if the businesses are trading strongly and delivering large levels of profit. But if they are not, or they need to perform better, then maybe it is time to get in and understand what makes your particular business tick. Who are your customers and where do they come from? How effective is your staff and are the premises laid out correctly? All questions you cannot answer from your office or the golf club.
Working on your business
This may be the largest investment you have and I wonder how much time you take to actually work on your business.
Do you look strategically at the product mix? Do you look for new markets? When was the last time you assessed the effectiveness of your marketing and do you have the optimal staff?
Ask for help
The biggest piece of advice I can give is that if you are concerned, confused or simply don’t know, ask for help. I guarantee this will be the beginning of something better. You are not alone.
Paul Rowe is chief executive of business solutions company Razor.
Contact him at prowe@razorbs.com.au
