Are you in this situation? All’s well in the world; you have plenty of work coming in, and money in the bank to pay the bills you have. So many of us travel like that; we operate on a day to day basis, the sun is out, the sky is blue. We assume that the work coming in will meet our cash flow requirements.
But what if there are problems ahead, around the next corner on the road we are travelling? We can’t see ahead, there’s a thick fog blanketing the road, we can’t see where we are going. We look at the dashboard; we know how fast we’re travelling, and how much fuel is left in the tank (bank), but not much more.
One problem with focusing on the job in hand is that we lose focus on promoting our business, and the ongoing sales we need, particularly if Murphy strikes, and the job in hand requires extra attention and effort.
But there is more to that fog around the corner than that. Have you ever been in a very thick fog; “like a giant eraser moving indiscriminately to eradicate what was once there into something that's not”, it blankets you, you lose your sense of direction, you have no clues on where you are no matter which way you turn, even sound is deadened, “swallowed by the greedy beast”.
Is your business like that, you don’t know where you are, how you are travelling, or even whether you are heading in the right direction?
The road to success is paved with good information. Good information disperses the fog, and gives you a clear view of your world.
And that is the problem we have in our business. We don’t necessarily have a clear view of what is happening. Sometimes the problem is pretty obvious, like a leaking tap. A particular line or activity is obviously costing you money. If we can see it, we can do something about it. But what about the times when you don't know profits are leaking. You don't know until you get the quarterly, or half yearly or, even worse, the annual figures. Because by then, it is too late. The profits have leaked.
Sure, you might then plug the leak, but what is gone is gone.
Are there aspects of your business which are not doing as well as they should? Hidden leaks. Are you in markets which don't perform as well as others you could be in? Is your level of enquiry slowly declining, and what about the success rate of quotes to sales?
Do you know your true Cost of Sales? If you don't, I’d be willing to bet you are not covering all those costs, and are writing them off against overheads, not recovering them against the sale.
The problem could be anywhere.
So here are some clues about information which will help disperse the fog, but not in any particular priority. Hopefully one or two of them will really resonate with you.
1. Information enables you to make smart decisions about how to grow your business. Relying on PHOGy thinking (Prophesy, Hearsay, Gut Feelings) is one thing, but studies show informed decision making is more likely to be right. So is the information you need available; I'm looking at more than just KPIs.
2. Do your financial statements give you the information you need to lift the fog? Studies show the less regularly you review and analyse these, the greater the probability of business failure.
3. How do you know if your current business strategy is working and viable, if you haven’t the right information? If you are not growing each month or if you have profit leaks, it is important to find out quickly so you can make some changes before it is too late.
4. Information certainly helps cash flow management; knowing what is coming, and when.
5. Spending money and effort on activities, products and services that just don’t contribute is a waste; the 80/20 rule always applies – 80% of your sales, and profits, will come from 20% of your products and services. And the reverse applies. Wouldn’t it be useful to know which they are?
6. Excellent businesses have access to excellent information – they make better decisions, more focused decisions, and quicker decisions
So pave the road to success with good information, and you won’t be fog-bound.
When clients approach me for coaching, clients with businesses that are underperforming despite the crippling hours and effort the owner is putting into them, it is not just marketing that is holding them back. They so often lack a management mindset, and lack control over their business. Eight times out of ten that lack of control comes down to a lack of knowledge of what is happening in the business.
For more than 28 years I’ve been helping small business owners plug the profit leaks in their business and restoring their cash flows by assisting them understand the information they need to have control over their business, how to manage and analyse it, and how to answer that critical question – WHY IS IT SO?
If you would like to discuss with me how you might do that, book a Strategy Consult here.
© Copyright 2016 Adam Gordon, The Profits Leak Detective
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?