John Maxwell says ‘ People are like rubber bands: They must be stretched to be effective.’
We need to look at what is happening around the world today as a challenge and an
Opportunity to improve...
“The reason so many people never get anywhere in life is because, when opportunity knocks, they are out in the backyard looking for four leaf clovers.”& #8232; Walter P. Chrysler
Stop the Leaks –
Improve Cashflow
Lets look at just a few practical ideas to improve cashflow RIGHT NOW
Look at your prices
Now might not be the best time to increase prices but look at how you
& #9702;Add value with better service, warranties, installation or delivery. Just returning phone calls and turning up when you say so is a big win (try getting a tree arborist to quote sometime!)
& #9702;Segment prices for better return – I often tell franchisees in older markets to have a selection of smaller (halved) slices or cake offerings at a better margin per unit since their customers are often tempted to buy smaller portions.
& #9702;Educate on value rather than price train your sales staff well on product value and attributes
& #9702;Have unique selling propositions – eg. For food products, coffee beans etc, sampling with special introductory offers and accompanying coffee knowledge, leaflets etc, always works well
& #9702;Look at some exclusive lines no one else can offer
& #9702;Change some of your products or packaging to create interest & re price. Price low and you will be seen as cheap, especially if considerably under other products in the market.
& #9702;Create bundles or packages of low cost items with high perceived value
•Reduce your Cost of Goods
& #9702;Step one work out the quantities you will require for say, the next two years and talk to suppliers. You should be able to negotiate better prices if you can provide them with consistent business.
& #9702;Look for alternative suppliers
& #9702;Aim to reduce all costs by 10
& #9702;Buy in bulk, Pay and receive delivery over time. Most suppliers are looking for long term orders. We did this early on at Gloria Jean’s Coffees to get bulk discount rates and also to help our warehousing space by receiving (and paying) over time.
& #9702;Increase speed of operation. One company we know has improved cash flow considerably by reducing production/ delivery times (it took a staff alteration to do this!)
•Reduce Inventory
& #9702;Sell stock.
& #9702;Give aways – eg. buy one get one free, or half price; Bundle items together at special discount price or give all customers something free when they purchase or visit.
& #9702;Try before you buy, samples, free trial periods etc.
& #9702;Promotions – local ads, radio, letterbox drops, shopper dockets, direct mail, deals with other businesses, movie theatres, etc.
& #9702;Improve inventory accuracy – do regular stocktakes so you know what to order, what sells & what is rubbish.
& #9702;Reduce your inventory. Look at ways to get rid of old slow moving stock – get to it early before it becomes unsaleable.
& #9702;Replenish based on market demand.
& #9702;Get rid of excess storage area. Retail stock in the back room isn’t seen & won’t sell! I often ask retailers have they opened their store room to customers since this is where they keep everything.
•Collect Accounts
& #9702;Look at your terms. Change them to cash terms rather than sending an invoice or reduce from 30 to 7 day terms.
& #9702;Increase the price on payment over 7 days, 14 days etc.
& #9702;Overcome your fear of collection – make sure whoever does this job is polite but firm and persistent.
& #9702;Have a defined collection phone procedure.
& #9702;Have a reliable system to track accounts and keep it up to date.
& #9702;Have your staff trained on collection tips & techniques
& #9702;Visit your customer.
& #9702;Suggest an alternative where there is difficulty – better to get slower payment than none at all, it all helps the cashflow.
& #9702;Be aware and educate yourself Worst case scenarios I won’t go into but there can be a need for debt collectors, lawyers etc.
•Paying Accounts
& #9702;Automate your payment system and pay as accounts are due
& #9702;Extend your accounts payable period
& #9702;Try before you buy
& #9702;Where possible only pay when sold
& #9702;Pay the minimum
& #9702;Introduce a card for bonus points/55 days interest free or points that can be used for travel.
•And More
& #9702;Get deposits
& #9702;Progress payments in advance – similar to the old lay by system.
& #9702;Telemarket existing customers call to see how the product/service is performing. Offer updated add ons / replacement or special customer prices.
& #9702;Arrange easy finance.
& #9702;Sell your system (or product) in other territories.
& #9702;Events to highlight the product – anything will do as an excuse: birthdays, 1,000,000th customer, local events, seasonal celebrations, new or revamped premises, under new management or new owner even a party just for the sake of it!
& #9702;Look for free advertising & PR stories to give local media. Provide product or services as prizes for local media to run a promotion.
& #9702;Accept all credit cards and EFTPOS. This is one many smaller businesses need to heed! A sign that says Cash only these days will definitely drive people away and/or result in small item sales only.
& #9702;Accept cheques.
& #9702;Up sell, customers who are ready to purchase, or who have got a bargain will often be happy to buy more.
& #9702;Cross sell or add on sales. One of our franchisees increased his weekly sales by $3,500 simply by offering a small $1.95 add on food item to each customer, increasing average transactions from $4.05 to $5.05.
& #9702;VIP or club membership with special benefits
& #9702;Sell add on warranties or contracts
& #9702;Have a 1800 Phone number and a well trained receptionist
& #9702;Website – keep it up to date and helpful, easy to find and negotiate. Look at utilizing it more eg. with special website deals
Remember these are just a few ideas to stimulate thinking. Be creative, not defeatist now is a good time to take a good look at cash flow, create new ways to price, sell, promote, tighten up stock levels and accounts.
& #8232;“Lets all strategise how the job can get done, versus informing each other why it can’t be done.”& #8232; Melissa Gonsales
A Budget is not a Plan
The other day an enormous Excel spreadsheet arrived in the inbox of one from a fellow business advisor.
Here’s our annual plan, announced the email proudly from the business owner what do you think?
He looked at the mass of numbers; the only words he could find were the column titles, he called the business owner immediately:
& #8232;& #8232;“I think this is the budget” he said to the business owner.& #8232;
“You’re right, it is the budget. Our annual plan is to make the budget.”& #8232;& #8232;
“But what steps are you actually going to take to make the budget?”
& #8232;“Oh, not sure yet.”
It’s June. Business owners are buried in budgets, muttering about containing costs and steadying revenues. Plans are being revsited or born.
Or are they? A budget isn’t a plan; it’s simply a financial interpretation of a plan. If you are serious about making 2010 a good year, you need to be serious about planning. & #8232;It’s not too late to get it right, but you do have to start now.
Here’s how:
1.Book an annual planning day in the diary of your whole management team and do not forget to include your Business Advisor. And don’t let anybody wriggle out; despite what they may think, nobody is too important to the daily running of the business to attend this session.
2.Hold the annual planning day offsite. If you don’t do this you will lose half the team to their computer. In our experience an offsite held in a little cottage half way up a mountain works very well – not least because the iPhone/BlackBerry doesn’t. The best offsites start with dinner and a sleep over the night before, thereby getting all the social stuff done before the day itself.
3.Start the planning day with a recap of the business foundations (purpose, passion, profit driver, brand promise and core competencies) and strategic intent (”big hairy audacious goal”, five year targets). If you are a bit rusty on these we suggest you hold a strategic planning day in advance of the annual planning day to work these up.
4.We believe a high level SWOT analysis is a useful tool next. Not only does it get everyone in the right frame of mind for planning the business, but it also gives people a chance to air their concerns.
5.A review of the year just gone is a useful next point on the agenda. But just cover off three highs and lows. If you want to do this in more detail than we suggest you do so over dinner the night before.
Now you are ready to commence planning for a successful business. We suggest you start with the question “what do we want to achieve by the year end?” While you want to end up with measurable goals out of this section, leave it quite open to begin with. You want to unearth goals such as “new product X on market” which you won’t do if you head straight for goals around revenue, profit and ROI.
Decide on, say, five measurable goals. Maybe three around the financial metrics (revenue, profit, working capital) and two around something that is important to the future of your business but will not drive profit this year (such as foot in the door with “A” list clients/new geography, new product).
Once armed with the goals, spend some time defining the five strategies you will adopt to get there. Remembering that after the planning day there will be no action unless someone is held accountable, We suggest that you would allocate an accountable person to each strategy right now.
Next take the five core strategies and work them up into tactics for each quarter. You will probably want to focus your effort on tactics for quarter one, just noting for future quarters when you will start those things that will be kicked off later in the year. You can complete the tactics for the subsequent quarter at your next quarterly meeting. You will of course be holding these meetings now, won’t you?.& #8232;& #8232;
At the end of the planning day you should have agreed on five annual goals, five core strategies for the year, and a handful of tactics for the first quarter. You can quickly document this in a one page spreadsheet.
You are probably now thinking that this is a lot to cover in one day, and we tend to agree. We regularly recommend that the “annual planning day” be a two day event but we also realise how hard it is to get the management team away for one day, let alone two, so it’s your call.
What next? Well there is much to do to bring your annual plan to life in the business. Firstly you need work on creating a budget that reflects the plan, rather than a plan that reflects the budget, this is where your Business Advisor can offer you invaluable help and assistance.& #8232; & #8232;This article was supplied by Icon Business solution of which Tony Gattari is an accredited Business advisor
Author Resource:
Tony Gattari of Achievers Group is a business keynote speaker and guest speaker. His passionate enthusiastic style makes him ideal as your next sales speaker, marketing speaker or keynote speaker. Tony Gattari has worked with over 120 businesses. See http://www.achieversgroup.com.au for more info.
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