For many business people, particularly whose companies are less complex to run, the difference between success and failure is measured by how much they’re able to take out of the business, whether they’re being paid on to and they’re making payments on time to their suppliers, and their ability to meet their tax obligations when they’re required to.
However, for all businesses, particularly more complex and larger businesses, you should be on a continuous drive to make the maximum possible return for the minimal amount of outlay and effort.
Ask yourself this question – if you are turning over £1m a year, what is the absolute minimum level of profitability you would find acceptable? If you want to reach that level (or you want to improve on your profitability), you need a business plan to codify what your targets actually are and so that you have a way of measuring whether you’re achieving them.
We’ll partner with you on doing a plan specifically for your company and, when we’re working on putting it together with you and helping you monitor it, we’ll focus on three key areas.
1. Are you wasting valuable time and effort with certain products or services?
Over the time your business has developed, you will likely have developed a complimentary set of products and services to maximise the sales opportunities you can exploit.
Some products and services will be more profitable than others. Some products and services will take longer to fulfil and there’s no guarantee that those more difficult products or services will produce a better return for you.
“Opportunity cost” describes the financial cost of taking one course of action over another. If your sales staff, your marketing team, and your employees involved in fulfilment seem to be spending a disproportionate amount of their time and effort on providing goods and services which produce a materially lower return than your other products and services, can you increase the price you charge to improve your company’s overall level of profitability? Or, would it be worth stopping selling that product or service and getting your team to focus more on selling and fulfilling the products and services where the rewards are much greater?
Work out the level of profit on everything you offer and then ask your team members about the various different challenges in supplying your clients and keeping them happy. If certain products or services seem to be sucking time, effort, and resources out of your business where the return is not clear, explore with your team the best way forward to improve the situation.
2. Improving productivity and efficiency
When we’re working with you to put together your business plan, we’ll go back through the previous 1-3 years of trading with you to identify all the costs you are and have been incurring. Are certain products or services requiring more after-sales time than others? Have certain costs of supply and fulfilment gone up for different products and services in the last year or two?
Sometimes, your business will be doing things it no longer needs to do or which could be done with fewer staff or cheaper suppliers. Let us find out how your spending patterns have changed in supply and fulfilment over the last few years to look for ways to do the same level of business where you can pay out less.
3. Going for growth or consolidating?
Not all businessowners want to grow their business in terms of turnover, number of staff, or range of products and services. Just because you run a company which has £1m a year turnover doesn’t mean that you’re obliged to try to increase it to £2m. You may not want to experience the stress and upheaval that is a feature of expansion.
In those cases, the key to growth is finding productivity and efficiency savings – it’s about finding the optimal combination of products and services that work best for your company and its current set-up.
If you do want to expand, a whole different set of financial considerations must be taken into account. Expansion always involves increases in fixed costs like wages, rent, IT, and so on. Some of the one-off costs can be considerable – recruitment fees, deposit on a commercial lease, legal fees, and so on.
For a while, your company will lose money month on month until your new staff are at the level you need them to be at for optimal performance. It’s a nervy time for any entrepreneur. Expansion planning requires either a sustained effort to keep cash in the business for use later on during your growth phase or taking on debt finance. Either way, you need help from accountant to plan how much money you need both to cover all the costs and to put aside additional funding because expansion does not always go to plan.
Keeping track during the year
What we’ll cover in our business plan service includes many more important factors than the three most important we’ve mentioned in this article. However, it will be worth it because, in our experience, our most successful clients have the greatest thirst for knowledge on every aspect, particularly financial, of their own business.
We’ll devise profit and loss and cash flow forecasts meaning that you can keep track via your online bookkeeping platform and your regular contact with your Panthera professional whether you’re heading in the direction you want or whether you need to make minor course corrections during the year.
Accountants with a fine eye for detail
Make more from what you’re doing - to find out more, please call 01235 768 561 or email firstname.lastname@example.org.