Archivesbusiness planning Archives — C. Lynn Northrup, CPA, CPIM
We’re facing the biggest challenge we’ve ever faced in our country and the world. Millions of people are without jobs and many businesses have been forced to shut down. We’re dealing with the Corona Virus crisis, the silent killer sweeping the country and the world. People are asking what we should do and how can we survive. I don’t the answers to the future. My advice is rather than panicking, take this time to work on your business and prepare for a future after the crisis.
Working on our business, what does that mean? Here’s what I think it means and some ideas on what we should be doing:
- Brainstorming for new ideas
- Assess your strategies and adjust for the future as best you can
- Evaluate and assess all the new risks
- Figure out how much money you will need to survive and ways to access it
- It’s essential to orient your business to the reality of new economic and market conditions
- Consider how to maximize assets to get the most bang for the buck
- How can the stimulus package be used to maximize your cash flow?
- Think about managing the scale of your business to fit and adjust to the future reality
This list could continue, but this gives you some thoughts and ideas on where to start working and focusing.
In addition to these ideas and thoughts, it’s essential to realize that there are only 4 ways to grow your business:
- Increase the number of customers of the type you want
- Increase the frequency of the transactions
- Increase the average value of each sale
- Increase the effectiveness of each business process
It all really boils down to these 4 ways and they need to be quantified in order to create focus on the right steps. Remember that what you can measure, you can manage, and produce the result as a result creating effective processes.
So, in the mist of all the fear and chaos, take the time to contemplate and consider different scenarios. Both the good and the bad. Plan for the worst and plan for the best. This will put you a better position to act and do what needs to be done.
We’ve just finished up paying our taxes for the year. Maybe you had to pay more than you wanted and had to scramble to come up with enough cash for the payment. You might have looked at the numbers and wondered why we didn’t do better. There could be lots of scenarios to the story.
Reality is that many businesses don’t really know how they are doing and wonder how they can do better. This is an all too familiar theme for most small businesses. It is essential for businesses to take time to consider their options.
Here’s some signals that maybe your business could use some help:
- Gross margins have decreased.
- You can’t identify your product margins.
- Profit margins are too low.
- Your cost structure is out of line with the competition.
- You’re borrowing too much.
- You have declining trends over the past few months.
Maybe you need a tune-up:
- Has income declined over the last three quarters/
- Are sales declining?
- Are you satisfied with your overall results?
- Do you have a plan to maintain your rate of growth?
Here’s some signs that things need to turn around:
- Are you starting to lose money?
- Do you have too much inventory?
- Can you recruit new help?
- Do you have too much debt?
- Do you know where you are making profits?
- By customer
- By product or service
- Have you lost business to competitors?
Crisis questions might include:
- Can you meet payroll?
- Will the bank lend you more money?
- Have good employees quit?
- Have vendors stopped shipping goods to you?
- Have you had time to think and strategize?
- Have any of your customers who don’t pay on time stopped ordering?
Maybe you just think your business should be doing better and you don’t know why. Whatever the reasons, there are things every business should and could be doing to make things better. My blog post on Biggest Business Problems explains and discusses these issues.
The first thing businesses should do is step back to reflect on what you have done and where you want to go. Businesses fail to engage in “Strategic Thinking” and they fail to effectively “measure their performance” on a regular basis.
These are what I call the Management Tools for Success that are critical for growing and increasing profitability. Business owners need to spend the time and effort to learn about accounting and measurement. In addition, they need to then learn how to apply these tools to making their business more successful.
My goal is to provide business owners with the knowledge and tools they need to be successful. Take advantage of my consulting experience which are offered as resources for businesses on a subscription basis and as toolkits and checklists which can be downloaded from my store.
A good way to get started is with The Guide to Strategic Thinking and The Strategic Thinking Toolkit and creating a plan for Profit Enhancement. The key is doing something rather than just thinking about it. So go make it happen.