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Can you apply Warren Buffet’s best advice to your small business?

Discipline and attention to details is more important than ever if you want to succeed in challenging economic times. Take a look around… competitors are closing their doors – which means more potential customers for the businesses that DO survive. And in times like these, it’s going to take more than “thinking outside the box” and goodwill with existing customers to secure the survival of your business.

You may have been lucky over the past few years – you may have found it possible to operate without a detailed, written plan and systems/processes. But the global economic crisis has changed all of that. If you want to thrive, there is only one thing that is for sure – uncertain times call for deliberate decisions and proven practices. So here are my top tactics to recession-proof your business.

1. Begin with the end in mind

If you don’t know exactly where you are going, how will you know when you get there? Now is the second best time to decide on your strategy, set your goals and document tactics and timelines. Keep it simple – write a 2-3 page summary of what you intend to accomplish in 3 months, 6 months and 12 months.

2. Focus on cash flow not profit

You cannot buy a house or a new car with “profit” from your business. Make it your mission this year to develop and maintain a weekly/monthly cash flow forecast for your business. This is not hard to do but it does require discipline and a simple excel spreadsheet. If you need help, I recommend that you consider signing up for Imagineering Profit. With just a few numbers from your Balance Sheet and Profit and Loss statement, Imagineering Profit can calculate your cashflow for you and give you the insight that you need to get your company operating in the black!

3. Collect your debt NOW!

How many days does it take to collect your debts on average? Whatever it is, make it your goals to reduce this by at least 10 days. You may be surprised to know that if your annual revenue is around $500,000, you could save yourself up to $2,500 in interest carrying charges simply by collecting your debts 10 days quicker on average. Pay attention to customers who are taking longer than usual to pay. Now is not the time to be extending too much credit if you are concerned about their ability to pay.

4. Rank your customers

Do you know who your best and worse customers are? Have you ever tried to calculate how much profit you are making from each customer or group of customers? If you don’t know the answers to these questions, today is the best time to start tracking and measuring this.

5. Fire your worst customers

Everyone knows that is cheaper and easier to garner incremental business from existing customers. Some even argue that it is 6 times cheaper and 75% easier to convert a sale from someone who already knows and trusts you. If you have unprofitable customers, get rid of them and focus your attention on your best customers.

6. Trim your product range

Contrary to popular belief, it is better to have money in your back pocket than tied up in stock sitting on your shelves for months on end. The longer it sits and does not turn over, the more it actually costs you in lost opportunities. Spend 2 hours today calculating which of your SKUs or stock lines are your worst performers; make it a priority to sell those quickly to release some much needed cash. Consider reducing your overall investment in stock. Compile a spreadsheet of all the SKUs you carry and then run two separate columns – one for how many units you sell on average of each per month and the other being the total units on hand. If your stock gets delivered quickly, you should never be carrying more than one month’s worth of sales at any given time.

7. Monitor your breakeven and key numbers

The most important day of the month is the day that you break even and start making a profit. If you don’t know which day of the month that is, you need to find out today. Knowing this number allows you to monitor your performance and take measures to correct issues right now. Waiting until the end of the year for your accountant to produce financial statements is not a good idea – if you are behind, you need to know now so that you can correct the situation.

 

ImagineeringNow
About The Author
Rhondalynn's life changed forever after the loss of her mother due to a senseless tragedy in 1992. She decided that despite her formal training and a promising career as a lawyer and chartered accountant, she wanted to do something more. So despite the fact she had already invested 10 years of her adult life in university and articling, she did the unthinkable. She left her high paid job as Commercial Manager for one of the largest corporations in the country, she re-trained herself in the sciences of the mind and she discovered a passion for writing and sharing her knowledge with business owners and executives. Rhondalynn has distilled the secrets to business success - that she learned from her life experience and working in GM level roles with Price Waterhouse Coopers, Max Factor, Village Cinemas, and Coles Group Ltd. - and produced a simple step-by-step process that you can apply to your business to boost your sales and bottom line. Rhondalynn can help you put strategies in place to grow your bottom line and ensure that your customers would never think of going elsewhere. She is the leading expert on harnessing the power of your brain and using it to improve your financial results in business. Rhondalynn is the author of On The Shoulders of Giants, Imagineering Your Destiny, Sobre Hombros deGigantes, Financial Foreplay, and Sales Seduction. She has appeared on CNN, Bnet/CBS, Channel 7, Channel 9, Kochie's Business Builders and 3AW, and writes for Yahoo, MYOB, Fast Thinking, Sunday Life, Dynamic Business, Business Spectator and Australian Retailer.

1 Comment:


  • By Alex 03 Apr 2012

    Great post Rhondalynn.

    I’ve always believed that the greatest prosperity can occur during a downturn. People are looking for what’s genuine and has their best interests at heart. This is the time when the cream rises to the top.

    Also, contrary to popular opinion, it can also the best time to start a business.

    Great tactics here. Have taken note! Thanks for sharing.

    Alex

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