Thursday, 12 October 2017

It's been a warm summer - beware the cold winter

I underlined the key part: ‘Starting a business is easy, growing a business is the tough part.’

Because it’s tough and because it is all too easy to take your eyes off the ball – whether you are Tesco or the corner shop – you should take nothing for granted. Step back (try sitting on the opposite side of your desk, it offers a great perspective), take the phone off the hook, grab a sheet of paper (not a tablet, paper) and jot down the pivotal factors of your business.

Pivotal factors are key events that individually can swing business one way or another independently of other events.

What are the key (basic) elements of PROFIT:

£SALES X FREQUENCY = £INCOME    

£INCOME - £COSTS = £PROFIT

£PROFIT - £TAX = £NET INCOME

Now bring in the fulcrum for each event. QUESTION:

1.     How much can you increase the price of your goods / service to clients without affecting SALES?

2.     How do you increase the FREQUENCY? Is your marketing effective/ Are you communicating clearly? Could you articulate your proposition better?

3.     Is the COST of each SALE as good as it could be? Could you ‘buy better’ or do you need to buy your office inventory at all?

4.     Is your Accountant doing their job? Could you be more TAX efficient in the way you manage your money?

I hear you. There’s nothing new here. But how often have you been to a business seminar, read the agenda, raised your eyes to the ceiling in despair at the thought of wasting a whole morning here - then rushed back to the office after lunch inspired by the three bright lights that taking time out to consider even the basics, just lit in your head.

Each of the above, particularly SALES and FREQUENCY can be broken down further to identify their own pivotal events.

If you do nothing else, grab another sheet of paper (if only to doodle - you know who you are), identify three fulcra for SALES and three more for FREQUENCY and consider the effects of change on each.

It’s an exercise worth doing to avoid a cold winter.






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