For most people in business, either self-employed people or directors of small companies, a few days off over Christmas & New Year may give time to reflect on the business challenges overcome in the last year and challenges likely to be faced in the next.
As accountants (here in Loughborough) dealing with a wide range of business types, we see patterns of behaviour. Sometimes simple changes will make a significant difference to profits – and quality of life.
2020 could bring additional challenges to quite a few businesses. The knock-on effect of Brexit may result in unexpected consequences for many. It is difficult to know just what those consequences could be.
However, there are some fundamental issues, common to a lot of businesses, which are not related to Brexit or trade deals or international trade in any way. Don’t just sit there in your own little bubble and ignore them. Here are just a few things you might like to think about. Having a clear picture of where you want to be in one, two or five years gives direction.
It is a truism that more businesses go broke through charging too little than by overcharging. Review your prices. Do they accurately reflect the cost of providing your product or service? If not, why not? If your prices are too low, why are they too low? If you are finding it difficult to compete, how can your competitors survive by undercutting you? Are they more cost effective than you?
Doing too much yourself
We find many small business owners think they save money by doing work they are just not trained or qualified to do instead of subcontracting it. This applies to all sorts of things. Whilst I can muddle through and do a lot of things on my car, watching an experienced motor mechanic carry out the same work in a quarter of the time definitely makes me realise that my time would be better spent working on what I know. It always amazes me that someone who has no training or knowledge about bookkeeping or accounts believes they save money by doing it themselves. The truth is that they get it wrong, pay more tax than they need to and waste their time. Use a specialist to save time and money.
Procedures and Processes
Most profitable businesses are very strict on writing down procedures and processes so they know that a piece of work will always be done in exactly the same way. Because writing the procedure in the first instance may seem time consuming many business owners avoid it. If by doing so, it enables you to do the job 10% faster next time, it doesn’t take many repetitions to get that time back. Consistency is another benefit.
Checklists naturally follow on from Procedures and Processes bacause having checklists reduces errors and speeds up work. I recommend a book called “The Checklist Manifesto” by Atul Gawande. The book describes how the application of checklists to surgical procedures reduced death rates by 47% (that’s right – 47% reduction in deaths following surgery).
Sooner or later you are going to exit your business. You might sell – in which case you want to get the best price). Or you might pass your business on to a child or other relative – in which case you want to make it as easy as possible for them to take it on and run it.
Which of these (or other possibilities) you are aiming for, planning for an exit makes you think about your business, often in a new way. To get the best price you need your business to be as effective and profitable as possible. This takes planning.
We recommend that you look at your business and ask yourself, would I be happy to buy this? Inevitably, there will be ways to improve it and make it more saleable. It does take a couple of years to get a business into a really good “saleable” position – so start doing something now.
We can help you with your business challenges – all of the above, and much more. There has to be a willingness on your part to want to improve your business. If there is, miracles may well be possible.
Contact us today (01509 816150) for a Free, no obligation, chat. It costs you nothing but could revolutionise your future.