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In my years of business consulting, coaching and mentoring, one of the first things I address with businesses is exploring where my assistance will likely have the greatest payoff. Those I work with often express that they would like to make more money, they need more sales or they want to improve their finances – which is usually an expression of their desire to improve cash on hand, take home pay or earnings.
Improving one’s financial condition is often the desired result, but just like a weight loss program where we need to make changes to our eating and exercise, to improve business finances, we need to first improve other areas.
Often overlooked is how we manage our finances. Do we merely look in the rearview mirror at our books and tax returns? Do we simply review bank statements? Do we avail ourselves of opportunity to any planning such as cash flow projections, prioritization and scheduling or major uses of out funds?
The more straightforward opportunities involve assessing opportunities to increase revenues or reduce costs.
Once we identify which area to focus on first (let’s say it is revenue attainment) we then explore how the following opportunities might affect business:
Raising prices
Increasing quantities
Selling more profitable items
Acquiring new customers
Entering a new market
Maintaining a loyal client base. This may sound ridiculous, but you’d be surprised how many companies lose customers almost as fast and frequently as they acquire them!
Next, we follow a similar line of investigation to explore Decreasing Costs. What can we do to lower fixed and/or variable costs? Can we reduce some of the recurring costs, such as rent or insurance or maybe taxes? Can we reduce the costs per unit sold or per employee?
Trickier is determining if we can eliminate inefficiencies, waste, rework, etc. This analysis may require some process expertise. We have found that an outside set of eyes will often see things that owners and management might miss.
The point is this. Business owners can’t simply hope to improve their finances; they need to roll up their sleeves, determine what must change to better the bottom line and then address those things first. They can’t just hope the fireplace will produce heat, they need to build and feed the fire!
By Bob Dodge
