I am listing these for you, along with some strategies to help you conquer these big problems. I hope you find it useful.
'Competitive Pressures' and 'Customer Acquisition' ranked as the number 1 and 2 key problems. We looked at those last time. Here is number 3:
# 3 - Price Margins and Profitability
Although this has been ranked as third, in my book this would be first. Many, many, many businesses I come across just don't look at this closely enough. I always make sure my clients understand their profits and margins including what they need to make profit... because without profit you will eventually go broke. Every business owner must know their numbers to stay in business - it is just that important.
I often see companies increase their sales, but reduce their margins to get the work. Or even worse, they loose sales and then drop margins to compete - very very dangerous if you don't know the numbers.
Make sure you know the margins on all products and services you have. Also you need to see every month if you are making a profit or loss. If you don't have monthly figures, the good news is that they won't be to hard to get. Whoever does your GST returns will have them. This will be your accountant, bookkeeping service or staff member. Ask them to show you, and go through it to find out your sales, margins, and profits. When you know sales, margins, and profits, you can look at what you need to do to improve them.
Pricing is a good place to start; even an increase of just 5-10% will have a big impact on profits - and most of your customers won't even notice.
If you are still unsure on this one, give me, or your accountant, a call.
Another problem you may be facing is:
# 4 - Customer Retention
Keeping your customers coming back time after time is really the backbone of almost every business. It is important to understand that generally, by the time you pay for costs of getting a new customer (in advertising, discounts and so on), you do not start making money from them until they become a regular customer. If you have gone to all the trouble of getting them, it is worth spending some time thinking about how to keep them. Often business owners are so busy chasing after the new customers, they forget about the old ones. Madness!
There are literally hundreds of strategies for keeping customers coming back, but there are two principles that can be applied every time:
First, give them a reason to come back. Try a loyalty card or offer them a discount off their next order.
Second, keep in touch with your precious new customer through Facebook, newsletters, regular specials, offering them different/new products, a thank you card, etc.
Remember that friend that you were so close to a few years ago; you didn't keep in touch and now they have drifted away? Well, customers are the same. There are plenty of competitors that want your customers and they are spending thousands of dollars in ads and special offers to get them. Don't let them steal your customers! Keep in touch and make sure your customers know you value their business.
And rounding out the list of top five problems businesses in Christchurch and Canterbury have in the current economy - SURPRISE! it's:
# 5 - Cashflow
No money in the bank and lots of creditors to pay = stress, stress, stress. This one can be a real killer. Enough pressure from cashflow and it takes all the fun out of business.
Cashflow problems will be caused by one or a combination of the following:
- Poor margins
- Poor profitability
- Too much stock
- Not invoicing on time
- Not collecting money when due
- Rapid growth (don't underestimate this one - this will kill you if you don't see it coming)
- Under capitalised
- Buying new equipment or assets and trying to fund it from existing cashflow
Bottom line is - to fix your cashflow problems you need to understand which area or areas are at fault.
Start setting up KPI (Key Performance Indicators) in whatever area you need to improve.
Just like in sports - all the best teams measure everything they can that will help them win the game. In rugby the Crusaders measure metres gained, number of tackles, number of missed tackles, number of penalties etc. They decide which key numbers will make the most difference to their game and then work on improving them.
In business it should be exactly the same. For example in Accounts Receivable start measuring how many of your customers are overdue, their dollar value and the percentages. Decide what is acceptable and start working on getting that number or better. This will put you back on track. But don't stop there - make sure you watch this figure closely every week and month. Compare each month to see if you are getting better or worse.
So - those are the top five problems in Canterbury businesses right now and some ways to deal with them.
The big question for you now is - what you are going to do next? Do you say, that was great information and carry on as you were. Or do you pick at least one thing and take action? Only then will it help your business and increase your profits.