And you will find life a lot easier!

With over 20 years working with small business to help them improve their profitability a number of issues stand out that hold small businesses back. Not addressing them won't necessarily lead to failure, but you will certainly work harder, be more stressed and less profitable than you need to be.

How would you rate your business against these five areas? Why not take that question a step further; give yourself a score out of 5, where 5 is excellent and 1 is "hopeless".

1. Not managing your cash flow - do you manage your cash flow via your bank statement? No idea of where the cash is tied up in your business or how you could do more with less? Not being able to pay your creditors because your debtors are not paying you. Too much slow moving stock tying up cash which could be used for faster moving stock. No cash flow budget. Remember cash flow and profitability are two different things.

2. Not understanding your financial statements - can you really have control of your business if you don't understand the messages your Profit & Loss statements and Balance Sheet are giving you? Is the profitability of some product lines or services disguising the losses of others? How do you know? Are some customers more profitable than others? How do you know? Are all variable costs recovered from the customer who incurs them, or from overheads at the expense of your profits? Who is funding your business; you, the bank or your creditors? Which key ratios do you use to measure your financial health?

3. Not having a plan - Do you know where you and your business will be in three years? Or do you have a focus on short term day-to-day issues, rather than a long term objective? Are your trapped in being busy being busy, and going nowhere? Are the decisions you make based on those day-to-day issues, or getting you where you want to be? It's like pounding away on a treadmill, and where do treadmills go? Nowhere!

4. Haphazard marketing - Yellow Pages ads placed every year with no real thought, no measure of how many sales they generate. Ads placed at random in the local newspaper, radio or TV. Does your message match your market? No thought-through core marketing message or understanding of what makes your business unique, no marketing campaigns. Your target market is "everyone", but are you in markets which don't perform as well as others you could be in? How much repeat business are your getting?

5. Not having business systems and operating procedures - Have you noticed that all good businesses have good business systems and procedures? How much time do you spend each week redoing things that weren't done properly in the first place? Or telling someone how to do something that you've told them before, looking for something that wasn't put in the right place? It's frustrating but it's also a waste of your time, and your money. And it's all because of a lack of documented systems and procedures. Is "we've always done it this way" good enough today?

So how did you go? Is there an opportunity for improvement in your business? Avoiding even one of these mistakes will make a difference to your business, and to you.

If your would like to think about these issues a little further then our free E-Book, "7 Clues to a Profit Leak" looks at these questions and others.

© Copyright 2009 Adam Gordon, Profits Leak Detective

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Some profit losses are pretty obvious - so you fix them.
BUT, what if you don't know profits are leaking, cash out the door?
Possible leaks could be anywhere.
Are there some clues or symptoms that are tell-tales?

  • Get 21 Questions that help identify tell-tale clues of a profit leak.