When the economy is booming, everyone is running around like headless chooks being busy and inefficient. Then when times slow, we catch our breath and wonder why we were so inefficient while trying to drum up more business.
Right now, when I watch the news, and 90% of it is doom and gloom. The economic outlook, the unemployment, the mounting debt, all of it is bad.
Yet on the streets, most businesses I come across are doing OK. For sure many are propped up by funding subsidies, but by and large, the situation is OK.
So, with such conflicting signals what should you be doing in your business?
My recommendation is to take on an expansion mindset, but without increasing your overheads.
Most of you are aware of the Pareto or 80/20 rule. The practical theory explains that in broad principles 80% of any outcome is as a result of 20% of the effort or input.
I suggest you adopt the Pareto principle and put it to good use now.
Now is the time, either because you are in lockdown, or you are not quite as time hectic, or simply because you are ready to start working ON your business.
Now is the time to start Stripping your business.
The following are two simple and proven strategies you can implement today:
Step 1: Tighten your cashflow.
This is important as cashflow problems are the #1 cause of business failure.
Make sure you are measuring and reporting how long it takes to collect your income (your Debtor Days).
Do everything possible to ensure these are not exceeded.
- Invoice on time (or early)
- Call the slow payers before the due date and confirm that payment will be on time
- Insist on upfront payment for slow payers
- Stop supplying customers if payment is overdue
- Make it easy for your customers to pay (this is a biggie)
- Ask your suppliers for extended payment terms
Step 2: Apply Pareto to the following:
- What products/services are generating 80% of your Income and Margin?
- What customers are generating 80% of your Income and Margin contribution?
- What suppliers are providing you with 80% of your Income and Margin?
Analyse each of the above, it should take you under an hour to do this. What can you do to grow the product or customers or suppliers that are generating 80% of the good stuff? What can you shed out of the business?
The above is deceptively simple and logical. When last did you, or have you ever done this analysis?
Now IS the time to do it.
For the average business, you will find that your overall turnover and margins will increase, while at the same time you free up inefficient, time-consuming products/services, costly customers and non-value-adding suppliers.
Are you ready to strip down some of the basic fundamentals of your business as I have explained above?
Everything I have covered above will not take long to perform and will 100% be one of the best investments of your valuable time.
Please reach out to me if you would like any additional help on any of the above.