Guest post by: Peter Gjersoe Coach & Founder, Dominate Selling
It's now early May. Where do you think you will be by the end of June? By the end of December?
My name is Peter Gjersoe. I am a fellow small business owner with 34 years experience in delivering solutions that help clients grow and make their business more successful.
This is the first of two series of articles I will be publishing monthly.
One series will provide tips for generating “20% more profit in the next 60 days” and the second series is “How Lean StartUp Principles’ can benefit established businesses.”
Was 2014 everything you hoped it would be? Be honest, do you really feel we have left the GFC behind?
Enough! There are bills to be paid, so let’s look forward and not waste time thinking about what could have been.
If you came into this year with more debt than last year, you must get some breathing space and free up capital. Following are three good steps to start with:
Step 1: Take the knife to Pet-Projects:
Fact: Every additional dollar from sales only generates an average of $0.17 to $0.23 to the bottom line. Whereas, every expense dollar saved is a dollar going straight to the bottom line.
The best place to start cutting so-called fixed expenses is to look at ‘Pet-Projects’. Pet projects are activities and processes that are in place because somebody - with the best intentions, at a time long forgotten - put them in place, and they are now part of ‘the way we
- This operation is painful and it is recommended an external party who can identify and make decisions to cut without any personal baggage do it.
Step 2: Run your business as if you are about to go bankrupt - because if you don’t, you soon will be.
From psychology, we know that the most stressful situation to be in is ‘not knowing’. You must have systems that can tell you exactly where your business is in terms liquidity. This means you need to have, and review, up to date worst-case-sales-forecast-scenario, detailed expense commitments as well as an aged debtors summary - on a daily basis!
Further, make sure not a cent is being spent without your knowledge. No verbal updates, you must physically sign-off every expense, and you must understand why you are paying each expense.
Step 3: Enforce the 80:20 rule
Again and again the 80:20 rule has been proven: 20% of your current clients represent 80% of your income. Further, that the remaining 80% usually also includes the majority of your complaining, time-consuming and bad paying clients. Maybe it is time to fire some clients? Do you know who, and how?
Start by implementing a ‘Life-time-value-equation’ for each of your clients. Make sure you know who, and how, to look after, and what clients to you should tell: “Sorry, but we can no longer afford to have you as a client - unless something changes’.
Imagine your life, and business, if you spent more time with more of your Top 20% clients?
What is your alternative? Unless You change, nothing else will change.
I hope you have enjoyed the first three action steps.
Until next month: To the best of your success.
Phone: 0407 900 939