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We believe in passing on knowledge.

Well-run businesses have excellent systems that produce key information about the business' status. Regular monitoring is important to ensure the business owner or chief executive always has a finger on the pulse of business activity and can be quick to make changes where necessary.

Small businesses are fortunate in being able to respond quickly to fluctuations in the market place. In fact, to be successful, it is imperative they do move without delay to improve a bad situation. It is vital therefore to monitor the following information:

- Daily bank balances
- Daily sales information giving, total sales, sales of individual products and sales made to new customers
- Daily, weekly or monthly gross profit figure achieved (normally only available via a computer system)
- Weekly debtors' aged analysis, showing the amount owing to the firm and the age of those debts
- Labour productivity reports daily or weekly showing the actual time charged to clients or work on productive tasks – how does this compare to budget?
- A weekly statement of financial performance report
- Weekly creditors' aged analysis, showing the amount the business owes and the age of that debt
- Detailed monthly financial statements on all aspects of the business operations including statement of financial performance and statement of financial position, with comparisons to budget and cash flow forecasts
- Annual budgets and annual cash flow forecasts (updated monthly)
- Details of any lost customers showing details of what their annual sales had been and reason (if known) for them leaving the business
- Specific details on sales over a specified amount – who the sale was made to and what was it for.

At Paul Martin Chartered Accountant we can assist you monitor your key business metrics. Contact us today for help with you business systems.

Look at Alternatives Before Discounting


Many small businesses experience difficult periods where they need to generate additional sales in the short term, and many small businesses believe discounting their stock is the best way to move it.

But if you are going through a rough patch, consider the alternatives before resorting to discounting.

Discounting is a very costly form of promotion and comes straight off the bottom line of your business. And, there are no long-term benefits.

Instead consider adding a free product or service, free consultations or vouchers to the sale. This way you are introducing the customer to something they may not have tried before and, if they like it, they may buy it from you in the future.

Ideally your business wants a reputation for having much more going for it than just being a discount barn.

Sit down and think laterally before merely discounting your sale price. Working together with other businesses, for instance, can be beneficial for both parties, especially if they want an inroad into your customer base and will sponsor giveaways. For example, a movie theatre wanting to increase its numbers might give you free tickets to hand out as part of your sales promotions.

How to increase turnover in your business


Small increases can make a significant difference to your turnover. The question is: HOW do you make those increases?

That's where you need to think about implementing marketing strategies to increase your total number of customers, or to increase the number of transactions made by existing customers.

For example, you could: reward existing customers for referring new people to your business; encourage add-on sales; directly target your customers to inform them of special offers or new products/services soon to be available, or even to inform them of other products and services offered by your business that they may not be aware of.

Maybe your focus for one year will be to increase your customer base; the next, to increase the amount each customer spends on each visit; and so on. Whichever way you plan to raise the figures, the basic measurement data (discussed in last week's blog) will help you determine the targeted, annual sales figures for the current year.

Monitor Business with Business Measures

Every business owner needs reliable figures to regularly check on business performance.

A valuable set of measurement data to collect is your annual customer numbers, average sales, number of customer visits and so on. Using these figures as a baseline you can then set realistic targets towards increasing profitability and continue to monitor the business' performance on say, a monthly basis.

In a retail store, for example, (although the exercise is appropriate for other businesses also), you need to collect the following data from the previous year:

- Number of customers = x
- Average sale per customer = y
- Average number of transactions per customer = z.

By multiplying the figures, x * y * z, you can calculate the business' annual turnover. Ensure this figure equals the total sales for the year.

The next step is to use these figures to set specific targets for the following year and record this data in your business plan, for example:

- Number of customers last year – plus targeted percentage increase 
- Average sale per customer last year – plus targeted percentage increase
- Number of transactions with customers last year – plus targeted increase.

At Paul Martin Chartered Accountant Limited we can help you to set and monitor your business measures - contact us for assistance.

Be First, Be Different

Being first to the market with a sought-after new product or service can be a potential money-spinner.

If you've done your market research and business planning, pitched the product at the right price, planned the launch and have been particular about quality service, being first to the market will undoubtedly give you a competitive edge.

The challenge however of entering a competitive market is working out when the product or service is ready to launch. You may have to go in at a satisfactory quality level, rather than waiting to achieve the final couple of percentage points of quality.

If you procrastinate and a competitor beats you to it, you would have missed the opportunity to be the "pace setter" in the market by being first with the product

Know what your competitors are doing

Standing out above the others and being different is another way of creating your competitive edge.

To compete in a market, you need to know what your competitors are doing and offer a better deal.

But don't compete on price alone. Instead, make customers believe your business offers better value for money in other ways, for example:

- After sales service
- More personalised service
- Value-added service
- Long guarantees
- Better than average quality.

A small service station, for example, might offer a free tyre check and windshield-cleaning service to customers, to compete with the bigger self-service, cut price petrol stations.

When you have your customers thinking your product or service is a better deal, even if it's just the way they interpret it, then you have created a Unique Selling Proposition (USP) for your product or service in the market.

If you want to make profits in your business, try to make your business look different from that of your competitors. Dare to be different!

Contact us for help with your business planning today!

Keep Reviewing Your Business

When was the last time you checked performance against your business plan?

The business plan needs to be under continual review to make sure you are successfully implementing each planned stage. It won't be any use to you unless you use it.

By writing a business plan you've taken the time to plan in detail what your business goals and objectives are - it's a living, working document, not something to be filed away and then dusted off for review in a couple of years time.

This concentrated thinking, discussion and debate is the key to the formulation of a workable and achievable business plan. And as long as actual performance is monitored against it, the plan should significantly assist in the long-term survival of the business.     

Ideally you should review performance on a regular monthly basis, or at the very least on a quarterly basis. Ask the fundamental questions:

- Where are we?
- Are we heading in the right direction?  
- Will we achieve the goals and objectives of our business plan?
- Should we review pricing structures?
- What has been the effect of the consumer price index increase?
- What has been the effect of price rises in our particular business?
- Should we raise our prices?
- Should the gross profit percentage be higher?
- Have we got empathy with customers?

On an annual basis you need to compare actual financial performance to the budgets and cash flow forecast. Ask:

- How did we perform?
- What went wrong?
- Have we learnt from the mistakes?
- Did we exceed budget expectations anywhere? Why?
- Can we capitalise on these improvements?  

A valuable assessment is to compare your business figures to industry statistics (please ask us if you need help obtaining this information).

You'll also want to know: What is the general business climate in your area? Is it conducive to your type of business? Should you be expanding, drawing back or diversifying? What is the status of your investment in stock?

Don't forget that the business review should also include an appraisal of what has been happening within your team. You need to look at:

- Recruitment
- Training and development
- Meetings
- Employment agreements
- Wage/salary reviews.

Use your business plan as a day-by-day, week-by-week, month-by-month reference point to compare where your business is against what you planned it to be. If there are any deviations, immediately investigate them and try to take corrective action.

We can assist you to develop your business plan - check out our range of business consulting services and contact us today.

Astute business people are constantly keeping a watchful eye on what is happening in their business environment.

If you want to keep up with the play, stay ahead of your competitors, and plan for potential fluctuations in the marketplace, you simply cannot hunker down within your own business and forget about the outside world.

You've got to be out there researching the market. But market research doesn't have to be an expensive exercise. In her book Marketing for Small Business Success, Angela Nitchov suggests using the following sources of information in the first instance:

- direct observation
- surveys
- sale tests
- small group discussions
- personal interviews
- the internet. 

If you want to take your research further, look to professional associations, trade journals, government departments and so on, which have potentially already done some of the information gathering for you.

What you're looking for are the potential opportunities and the impact of possible threats upon your industry. Think about the:

- capital available to invest in new plant or equipment
- major trends that have affected or will affect the industry
- changes to government policy limiting, or opening up entry to new markets
- possibility to forge alliances with other operators to gain more buying power
- future changes to demographics in the industry eg, an ageing population will have greater reliance on the health industry in the long-term
- new competitors setting up or current competitors changing what they do
- new technologies posing a threat to your business.

The list of potential questions can be endless and no business needs to answer absolutely everything. Look at the research as a means to help your decision-making and target your questioning as appropriate.

This information forms your SWOT Analysis – what you've identified as your business' Strengths, Weaknesses, Opportunities and Threats – and can be used to support your decision-making process.

Probably you did a SWOT Analysis as part of your business and marketing planning. If so pull it out and review – don't let it sit around gathering dust. The SWOT, as with all aspects of your business and marketing plan, needs to be constantly updated and modified. The business environment is forever shifting and you've got to keep abreast of what is going on if you want to realise opportunities and plan for potential threats.

Systemise Your Business

If it works, write it down – chances are you'll need to remember how you did that at a later date. In fact, why not write everything down, every function of your business. If your business follows a set of systems, it's likely to be highly organised and offer consistent service.

Various commentators have suggested the most successful way to run a business is to write everything down and develop the system as if the business was a franchise.

For a franchise business to be successful, it has to be replicated in many different locations and possibly different countries. The only way for that to work is if the business has been systemised. This means that for each and every function of the business there is an explanation of, or a system for, how the function is  
carried out, for example, the way your staff answer the phone, take messages, give quotes, make a sale and so on.

This system is then followed step-by-step by anybody who has responsibility for that function. For example, when we go into a McDonalds restaurant in Paris we would expect to receive the same service and the same food as a McDonalds restaurant in Wellington. Every function in that business – down to how the meat patties are cooked – has a system.

Franchise businesses, like McDonalds, have seen phenomenal success over the last 35 years and one of the key ingredients in that success would appear to be the preparation and implementation of systems.

Unfortunately though, many small to medium-sized businesses do not follow the franchise lead. In most cases they have no written system in place at all and often lack the discipline of the franchised systems.

Take a look at your own business. What happens when you go on holiday or you employ new people? Can it continue to run without missing a beat? While you might be intimately familiar with every function of your business you can't expect the same from everyone else. But if there is a system outlining how everything is done, you might be able to take that much needed break and you won't even be missed – that's what you're aiming for.

One of the key messages to come out of franchising is that what you do is not nearly as important as doing what you do the same way each and every time. If it's written down, new staff members should be able to pick up the task and complete it in a consistent manner.

Small business is about identifying and servicing niche markets. If you know what your niche market is you have a fantastic marketing opportunity already at your doorstep – as long as you know how to reach it.

Knowing where the market is and how to reach it should all be written in your marketing plan. This is where you include all the information about the market in which you operate – what you're selling, where you're selling it and for how much, who else is selling it, who wants to buy it and who your specific target audience is.  

Your marketing plan should also include how you are going to tell people about your products or services. The way you choose to market your business could easily determine how successful you become.

Advertising versus direct marketing

Where general advertising builds awareness and creates a positive image for a new product, direct marketing asks straight up for the order. It's about going straight to your target group, often with a personalised letter, and giving them a direct opportunity to buy.

Direct Marketing is not advertising. It is selling to existing and potential identifiable customers and its result is measurable.

The whole concept of direct marketing is that it is direct communication to a particular target; either a current customer, former customer or someone who you believe fits the characteristics of your current customers. General marketing, on the other hand, is not addressed to any particular customer.

But for direct marketing to be successful, the business must have a database. This is where you collect as much information as possible about your customers – their demographics (contact details, age, occupation), how often they buy, what they buy, how much they spend and so on.

When planning your direct marketing campaign, decide which type of customers you want to approach. Whether it's your top customers, or particular customers you think will genuinely be interested in the product you are promoting, the database should be able to tell you which customers to target.

Direct marketing, which can also use email, telemarketing or personal visit as a means of delivering the message, is a very powerful tool for small businesses because they can:

- concentrate and dominate niche markets
- generate additional sales from existing customers and new customers
- generate sales leads from groups of persons who are very similar to existing customers.

An education in ergonomics


Ergonomics is the relationship between comfort and efficiency. Effective ergonomics can lead to less injury in the office workplace and higher employee satisfaction. The way we sit, move and spend our day always needs to be assessed and developed to maximise productivity while enhancing health.

Here are some tips on ergonomics that employees should be made aware of:

- Have the computer monitor just below eye level and adjust the screen to eliminate glare from windows and lights

- The centre line of the keyboard should be level with the height of your elbow and tilted back slightly so that wrists remain flat

- Use an adjustable chair and get comfortable with the adjustment settings - it's also important to upgrade furniture regularly

Ensure staff are informed about effective ergonomics. It's best to prevent health and safety issues before they arise. If you want more information about workplace health and safety, visit www.acc.co.nz

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