Managing your business - tips

It is a widely known statistic that for many businesses, 20% of their customers are generating 80% of their sales. This means that the remaining 80% of their customers are generating only 20% of sales for these organisations.

Another commonly recogised statistic is that 20% of a business's customers generate 150% of the organisations's profits. This means that the remaining 80% of the organisation's customers are actually generating losses.

How do your customers' profiles compare to these statistics. Do you know what profits your customers are generating for your business?

Here are some tips to helping you manage your business more effectively:

1. Think strategic - In order to help establish or develop a business you need to set clear objectives of the business because they are your commitments to the future. You must then have a plan in place to show how you are going to achieve those objectives. This then has to be followed with a regular review procedure. Are you following the plan? If not, why not and what do you need to do to get back on course to achieve your objectives.
2. Identify risks - There many types of risk which your business should recognise, which be triggered by internal or external factors. You should identify the probability of these risks occurring and what action you intend to take when they occur.
3. Financial control - Crucial to the survival and development of any business is control over their finances. Too many businesses fail because they underestimate the importance of financial management. You cannot plan for the future if you do not know where you stand today.
4. Communication, communication - Staff are naturally a little suspicious and anxious about their job security. A number of your employees will always consider no news is bad news. Regular pep talks can therefore do wonders for staff moral.
5. Remember the bottom line - You are in business to make money. Keeping customers happy is just a means to achieving that objective. Consider the effect of losing your least profitable customers. You may, as a result, be able to react more quickly to your more profitable customers orders and generate more business that way, or you may be able to generate new business from new customers. Consider telling your least profitable customers that you can no longer afford to supply them unless you can increase your prices to a profitable level.
6. Building value - To be successful you need to build a business that can operate independently from you, its owner. To do this you need to develop a team approach to the business and in time hand over decision making to key members of the team. You also need to incentivise your staff and there are many different ways you can do this. Of course there are risks in taking this approach and these should be recognised and evaluated. The risk of not taking this approach is that you will always be seen as a one-man business, however many people you employ.
7. Having a business to sell - In order to sell your business successfully you need to have developed something that people want to buy. As hurtful as it may sound a potential buyer is very rarely going to want to buy you. By building a business with limited dependance on any one one person, you will make it far more attractive to a potential purchaser. The buyer can then either continue to operate is as an individual business or integrate it into his own operations. The benefit of this approach is that you will obtain a better price for selling your business and your staff have a greater chance to be part of a business with a continuing future.

As professional accountants we have experience in advising in all aspects of managing a business. If there are any matters that you would like to discuss then please contact us.