The ‘Focus 5′ for a stronger business
Small businesses face a myriad of issues each day that require frequent review and management, especially during these challenging economic times. There’s a lot to look at, but let’s walk through the basics that every business owner should know and tasks that should be on your to-do list.
A case in point: Joe is the owner of a small business. It’s just a little past midnight and he can’t sleep. A million worries are running through his mind. Sales have dropped 40 percent, his retirement plan has lost $100,000, he can’t collect on his receivables, and his vendors are hounding him for money. He doesn’t know what to do and he feels that the whole world is falling apart.
Thousands of small-business owners across the country are having thoughts just like this every night. The good news is that there are steps that Joe can take to get through his turmoil. In the end he’ll be a stronger (more rested) business owner because he followed them.
All businesses must focus on the following five items: sales and marketing; production (getting out the product or performing the service); regular customer/client contact; preparing and reviewing your financials; and collecting your receivables.
Thomas Judge, a colleague and fellow accountant, calls these steps, the Focus 5. If you regularly pay attention to these five things, says Judge, your business will survive and succeed.
Sales and marketing
Do you have a sales and marketing plan? Is it in writing? If it’s not written down, it doesn’t count! Do you have methods to find and keep customers and, more importantly, how are you measuring results?
Begin by brainstorming every possible form of advertising (e.g. cold-calling, direct mail, telephone solicitation). Next take the list and cross off any items that don’t pertain to your specific industry or just don’t work for your line of business. Now prioritize the list that remains. Involve others at your business. You’ll be surprised what comes out of these meetings and a lot of it will be good ideas.
What you do, what you sell, and how to be the company that people call for the product or service your business provides is the golden key to success. To best understand your production needs and expectations, look inward and review your products objectively. The best way to do this is to let your customers tell you their opinions as they are your most critical eyes and ears.
Use e-mail and phone surveys where customers can anonymously respond to questions in exchange for a small appreciation incentive. Try holding a small focus group with a handful of your most important clients or customers. Treat them to an exclusive event where they can try your latest product or service first and provide feedback.
Customers need attention. When they make a purchase they want to feel that their hard-earned dollars were well spent. What is your business doing to stay in regular contact with your customers or clients? Design and implement a written plan clearly outlining the method and when the contact(s) will be made.
For example, e-mail customers monthly, direct mail quarterly, telephone semiannually and visit annually. Even though customers and clients may be cutting back now, when they’re ready to buy, the business that has stayed in touch will more likely be the one they turn to first.
Your company’s financial picture is where you will see the results of all your planning and efforts. Is it paying off? Is your finger on the pulse of your financials?
If you cannot quickly generate a business report that provides clear and understandable data, you may want to find a trusted financial adviser who can keep your business on track and legal. Don’t wait until half a year or longer has gone by before you even open those checking account statements. Tend to your finances at a minimum of weekly, especially with payroll and cash registers, and review reports monthly in order to gain a month-to-month comparison and even a year-to-year look at how your business is growing.
Collecting accounts receivable
Can you, at a glance, see your account receivable totals to date? Can you age your receivables? Now is the time to take a tough stance. If you offer terms, find a straightforward and direct way to enforce them. As a rule of thumb, you can determine if receivables need attention by taking the total number of current receivables and dividing it into the total payments on hand. Your result should be 1.5 or lower.
Recognize the problems, figure out how to fix them, make a plan, and then take action. In tough times, it’s up to you to take the initiative, roll up your sleeves, and make your business successful. Taking action starts the process. Your business will be more profitable, and you’ll sleep better at night.
<font size=1>CPA Steven Feinberg, owner of Londonderry-based Appletree Business Services, can be contacted at 603-434-2775 or AppletreeBusiness.com.</font size>