Tips to improve your business performance

The majority of successful businesses try to stay lean and mean, by regularly reviewing costs.

The best place to start when reviewing the costs in your business are as follows:

• start with the biggest values (often wages, stock for resale, transport and property)

• check if you need the resource, if it adds value, and if the value significantly exceeds costs.

People

Consider if:

• your employees are productive and fully utilised

• are you using job costing (if your employees are delivering a service or producing goods)

• could you outsource the activities, particularly if there is lots of unproductive time.

Materials

Check:

• you are getting the best price if reselling (are all of your offices buying at the same best price?!)

• you have appropriate stock levels, re-ordering at the appropriate time and avoiding panic-buying / expensive next day deliveries

• how much space is taken and money tied up in slow moving or obsolete stock (can you free up space?)

• you are bulk buying where appropriate

• you are negotiating appropriate payment terms (discounts for early payment if you are cash-rich, extended payment terms if not)

Vehicles

Consider the costs of breakdowns and repairs (including overtime, lost revenue and short term hires).

Property

Are you making the most of your property? Think about:

• surplus space you could sub-let or licence

• how much notice you need to give to leave your premises.

Look at all of your resource and maximise their efficiency.

Cash

The most vital resource! Do you have enough and are you prepared for any downturn?

We recommend you have a high-level plan for 3 to 6 months, with a more detailed cashflow forecast weekly or monthly.

Talk to us if you have any concerns about your cashflow.

People

Are your team as productive as they can be, and are you making the best use of their time and skills? Consider if they need training or support to be effective in their role. Are they creating the right impression with your customers?

Other Resources

Ensure you're making the most of your stock, vehicles, property and equipment.

There should not be a single price for your product.

Different markets - different prices

Be aware that different markets, locations, volumes and values should have different mark-ups and margins achievable.

e.g. we have had clients who could achieve a 100% mark-up (50% margin) on small value sales, but only 50% mark-up (33% margin) on high value sales.

Certain locations (e.g. London) will often accept a higher price than, say, somewhere in Devon or Somerset. Buoyant markets will pay a premium unlike those which are struggling.

Know your true costs

It's vital to know what your direct and indirect costs (overheads) are. What does this mean?

e.g. if you employ 10 plumbers, it's likely they are all direct costs, while your admin person is an overhead.

By splitting direct costs and overheads correctly, you'll have a proper understanding of your gross margin (profit).

Be aware of the commission on your sales platform

Platforms such as Amazon, eBay will take a significant commission, and trade customers may demand large discounts. Look at these sales separately from others to enable you to check you are making sufficient profit in these areas.

Otherwise the risk is that sales will go up, but profits will go down.

View our business mix page for an example.

Check how you and your team spend time at work

Make sure everyone is making good use of their time and try to reduce duplication as much as possible.

e.g. if you are the best person at sales or customer service, how much of your time is spent on admin or accounts work which can be done more efficiently by someone else?

Look at the time you spend on customers too

Be brave and end your relationship with poor customers. Identify those who:

• waste your / your team's time

• don't pay promptly (leading to additional time on credit control)

• complain unnecessarily (taking extra time on customer service).

Find customers who appreciate what you do / sell and be prepared to leave those who don't. (This also applies to staff and suppliers).

Spend time on existing customers / markets

To generate new sales, we often focus on new markets. But don't forget to nurture existing customers. They may be ready to buy again from you, or may refer you to new business.