It’s all too easy to lose track of goals and time during the summer, particularly a good old fashioned English summer of warm days and balmy nights. Now the kids are back at college and the roads are jammed with school runs, commuters and more white vans that ever before I realise that I’ve taken my eye off the ball.
Perhaps this was Tesco’s excuse. In trying to be all things to all shoppers, taking Lidl on at one end, Morrisons in the ‘market street’ middle and borrowing quality ideas from M&S at the top. Now, of course they have ‘borrowed’ basic financial husbandry from Marks & Spencer as Alan Stewart moves into his new office (same title) as chief financial officer at Tesco.
Why?
Well, instead of paying dividends to shareholders as promised during the heady heat of the summer, Tesco in fact opened their tills to find they were short a cool, almost chilling £250 million – or to give it its full breadth of zeros; £250,000,000. In simple terms it appears that they accounted for income not yet presented and ignored costs due.
In short, Tesco stock crashed 11.6% off the market value that flew off the shelves on day one. Now one egg short of an omelette they, like many businesses across the country, wish they had paid more attention to basic business detail.
These are the words of Penny Power OBE, entrepreneur and development coach, written for the preface of a new book – ‘Thinking Profit – the journey’ that I read this summer (get a copy on Amazon).
“The growth of new businesses across the world reflects how easy it is now to register a company, build a website and begin trading. This is fabulous, however, the growth in failures is a poignant statistic. Starting a business is easy, growing a business is the tough part. Over 90% of global businesses employ less that 9 people which in many cases is through choice, but in a large number is due to the skills in building a business that can export, scale, withstand competitors and knows how to manage itself through turbulent times.”
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
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.
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