Want to grow your business?
Business health check
Have you taken your business’s temperature lately?
Like many small business proprietors you probably spend most of your time and energy
on the day-to-day running of your business. You only have time to focus on the moment,
due to the constant pressure you are under to meet orders, service clients and deliver
promised results.
But is your business realizing its full potential? Are your margins healthy enough?
Is it consistent with your original business objectives and goals? It’s worth spending
some time to ask these questions and, in response: review your systems and processes;
look at tangible ways to reduce costs and improve margins; and, importantly, identify
strategies for future growth.
Budgeting to boost business
Structured budgeting is the key to keeping your business on track.
To implement structured budgeting you need to calculate your true operating costs
– all forms of input should be costed: capital, intellectual, physical and material.
A properly detailed budget reveals what prices should be set to cover all expenses,
including the cost of goods sold or services provided.
Typically, there are four components to most budgets:
- Sales budget
- Production budget
- Profit and loss statement
- Cash budget.
In setting up a budget structure, there are two possible starting points:
- Budgeting based on past performances -
using the figures for the past 12 months as a basis for calculating costs, pricing
and turnover.
- Zero based budgeting -
calculating costs and pricing afresh.
You should also review your fixed and variable costs, such as labour, sick leave,
loadings and holiday leave – and always (and most importantly) remember to pay yourself
first.
By having such a system in place you can measure the performance of various parts
of your business and make more realistic estimates of turnover. In addition, you
can assess income versus costs.
The best money. Where is it?
You may be starting a new venture, or need additional funds to expand. Naturally,
the best capital is the money that costs you the least. You have several choices
and each has a different impact on your cash flow. You may consider an overdraft
facility, a fixed interest loan, business loan, commercial bill or fully drawn advance.
Or, you could explore these opportunities:
Equity Capital
Investors (who could be private individuals) buy a share of your business providing
you with funds to establish or develop further.
Debt finance for short times
A bank or financier provides finance for temporary or seasonal working capital for
periods of up to three years.
Debt finance for medium terms
A bank or financer provides finance for general working capital, plant and machinery
for there to 10 years.
Debt finance for long terms
A bank or financier provides finance for assets (such as buildings) for temporary
or seasonal working capital for a period of more than 10 years.
Determining the right loan or source of capital for your business requires careful
consideration. It is unwise to borrow too little, since it could stifle production
and/or the service needs of your customer base. However, borrowing too much could
mean you are overextended and the repayments are greater than your cash flow.
Your decision must always be measured against your goals and level of comfort.
Marketing the business
Finding new customers is the major challenge for Small business owners. Small businesses
typically find themselves strapped for time but in order to create a continual stream
of new business, they must work on marketing their business every day.
Common marketing techniques for small business include networking through word of
mouth customer referrals, yellow pages directories, television, radio, outdoor (roadside
billboards), print, email marketing, and internet. Electronic media like TV can
be quite expensive and is normally intended to create awareness of a product or
service.
Many small business owners find internet marketing more affordable. Google Ad Words
and Yahoo! Search Marketing are two popular options of getting small business products
or services in front of motivated Web searchers. Successful online small business
marketers are also adept at utilizing the most relevant keywords in their site content.
Advertising on niche sites can also be effective, but with the long tail of the
internet, it can be time intensive to advertise on enough sites to garner an effective
reach
Creating a business Web site has become increasingly affordable with many do-it-yourself
programs now available for beginners. A Web site can provide significant marketing
exposure for small businesses when marketed through the Internet and other channels.
Some popular services are WordPress, Joomla and Squarespace.
Social media has proven to be very useful in gaining additional exposure for many
small businesses. Many small business owners use Facebook and Twitter as a way to
reach out to their loyal customers to give them news about specials of the day or
special coupons and generate repeat business. The relational nature of social media,
along with its immediacy and 24-hour presence lend intimacy to the relationship
small businesses can have with their customers, while making it more efficient for
them to communicate with greater numbers. Facebook ads are also a very cost-effective
way for small businesses to reach a targeted audience with a very specific message.
In addition to the social networking sites, blogs have become a highly effective
way for small businesses to position themselves as experts on issues that are important
to their customers. This can be done with a proprietary blog and/or by using a backlink
strategy wherein the marketer comments on other blogs and leaves a link to the small
business' own Web site.
A solid public relations strategy that utilizes speaking engagements, press releases,
feature stories, events and sponsorships can also be a very cost-effective way to
build a loyal following for a small business.
Risk management
Ongoing planning is vital to the success of your business. However, your plans should
not only incorporate potential threats or risks to the success of the business but
also address these potential risks with contingency plans or fall-back strategies.
iXpress Certified Practising Accountants can help you identify both real risks to
your business and possible solutions, which you can then include in your business
plan.
Your business checklist:
- Have you had your business plan and figures independently checked?
- Are your future sales projections realistic?
- Have you reviewed your entire variable and fixed costs?
- Will you be increasing staff levels to meet projected demands?
- Do you have accurate stock records and a good system of inventory control?
- Can you negotiate better terms with suppliers on credit issues?
- Have you made adequate allowances for potential tax liabilities?
- Have you researched the competition and new market trends?
Links
Record keeping
Activity statement
Employees
What you can claim
Running a Business From Home
Div 7A Q&A
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