Hanrick Curran has almost 30 years of experience in helping small to medium sized businesses thrive. Through our direct involvement in working with business owners we have come up with a list of the top 5 things a SME business owner can do to increase profits.
1. Identify and prioritise your big rocks. As a SME business owner, you have enormous competing demands for your time. Having clarity on what your priorities are and what activities form part of those will help you filter out the big rocks from the sand.
To use an analogy, if your time is represented by the capacity of a bucket and your daily activities in order of priority are represented by big rocks, small rocks, pebbles and sand, you can clearly fill your bucket of time with sand leaving no room for the big rocks unless you prioritise to allocate time to do the big rocks before giving your time to the activities represented by pebbles and sand.
How You Can Start Today: Start by listing out the categories of work that you perform, break these into logical segments such as sales, marketing, technical, internal accounting, staff management, business management. Second, consider if your skills as business owner are crucial to the performance of the tasks within each category, highlight those that could be 'delegated' if there was someone to delegate them to, at the same time, highlight those categories that only you can drive due to your skills or contacts.
If there is capacity for existing staff to take on more as part of their responsibilities, consider who could be given the opportunity to perform some of the tasks in the categories that can be delegated. Alternatively, either consider grouping several tasks together to create a job description for a part-time or full-time addition to the team or seek a consulting firm to provide an outsourced service, ie marketing or bookkeeping. Whatever your approach to a resourcing solution, ensure that you have clarity on the type of work that you, as business owner, must prioritise to be efficient and productive to see a meaningful impact to your bottom line.
2. Identify and understand your current and target customers. Having a good understanding of the different segments of customers you currently have and which segments are most profitable to you helps direct your efforts in acquiring more and working hard to retain existing. Not all customers are the same, we all have customers who constantly ask for a better deal whilst demanding more time than others, making a conscious decision on how to deal with this segment, and sharing that with your team will empower you all to focus your time on the profitable customers.
How You Can Start Today: Analyse your current customer base and aggregate their total spend with your business over the last 12 months or last financial year. Once you have the list sorted in numerical order from highest revenue contributor to lowest, draw a line on the list when accumulated revenue reaches 80% of total revenue. It's likely the Pareto Principle will apply, with ~20% of your total customer numbers contributing to 80% of your total revenue. Ask yourself and your sales team a few questions armed with this information:
- How are we servicing our top 20% of customers to ensure retention?
- Is there more we can be doing for them to grow our revenue further?
- What is it that they value about our products/services?
- Where do we need to direct our marketing to find more of these types of customers?
3. Have a clear value proposition that is relevant to your target customer. In the process of understanding your target customer (who is ideally represented within your current customer base) make sure know what need your product or service is meeting for them. Have regard to competitor solutions and pin point why your product or service meets this need more effectively, whether it's in the delivery process, the quality, the after sales service, the expertise that adds value in the purchase decision, the reliability or an integration point to name a few examples. Having clarity on your value proposition will empower staff to focus on these 'selling points' to ensure they deliver into them every time, give you consistency in your sales messages and improve your sales conversion because you're providing a solution to a need.
How You Can Start Today: Test your knowledge of the customer needs you are meeting with your product or service. Pick out your top 5 customers and with them in mind, have you and your key sales or customer relationship staff list out all the needs these customers have that your product or service fulfills. Then list out how your product or service fulfills this need, your value proposition. Brainstorm the exercise so you refine these lists and force rank them. Test your answers by actually asking a few of your clients. Frame it as a client satisfaction survey and offer them a reward for taking the time to participate. Always include an opportunity for them to make suggestions on what you could add or do differently to meet their needs more fully.
4. Set Meaningful Goals. A failure to grow can often be put down to business owners not setting SMART goals. Specific. Measurable. Attainable. Realistic. Timely. The goals should complement not contradict each other, for example, if your goal is to grow turnover to $5,000,000 by 30 June 2014 then your customer growth goals should support that. As a minimum, your SMART business goals should include a relevant reference to Turnover, Customers and Margins, it may also include Staff numbers or the addition of a new Product line, Distribution Channels or a Productivity measure. Ideally, these goals will be measured and reported on progressively for management and cascaded down to key staff so they remain a motivating focus and not lost amongst the day to day grind.
How You Can Start Today: You can start by asking yourself where you want your business to be six months, 12 months and two years from today? Then identify the key drivers to deliver that outcome and what they need to be in order to achieve it. Support from a proactive Accounting Adviser is an important part of this process. Detailed budgeting, what-if calculations and reporting can be produced to keep you on track.
5. Find Time To Develop Strategy. Most successful SME businesses are successful because they develop smart strategy and execute on that strategy. Yet many business owners often confuse decisions and strategy.
Every business owner makes decisions about their business. For example, they decide where to market, how to market, how much money to spend on marketing and sales, what types of products and services to market and how they retain ongoing business. These decisions are important – but they are not strategy. These day-to-day decisions are like the moves we make in a game of chess. Knowing how to make a move lets you play the game. It takes strategy and execution to win.
How You Can Start Today: You can start by making sure that you set aside sufficient time every month or quarter to assess and develop your strategy, we call this balcony time, away from the day to day activities on the dance floor. During the time that you develop strategy, you'll want to focus on your goals (it's impossible to develop strategy if you don't understand your goals). Assess your product or service offerings, refine who your target customers are and how you're reaching them. Some questions you might ask about your business to formulate or update your strategy include:
- What is my current strategy and am I executing it? If not, why not?
- What is happening in my industry or with my competitors?
- What are my sales, profit margin and customer acquisition goals?
- What products and services do I currently offer?
- What products and services do I want to offer in the next X months?
- What distribution channels am I currently going through? Are they yielding results?
- What other distribution channels can I try?
- What is my value proposition and does it differentiate me from my main competitors X, Y, Z?
Once you start answering these (and other) questions, you'll have the content necessary to develop your strategy and be on the path to achieve your goals.
Most SME business owners have some level of doubt about whether they are covering all the important areas and find value in using Hanrick Curran as a sounding board for honest advice about their logic and plans. With a strong capability in delivering business improvement services, please call your usual Adviser at Hanrick Curran or Matthew Beasley on 07 3218 3900 for support to improve your business profitability.