Summer is a good time to do some pruning on your business. Now is the time to recharge some of the areas of your business that may have been neglected recently. While you have been able to get away with a few loose ends and haphazard processes, to stay competitive in the marketplace you must make some changes in the way business has been conducted.
Here is the business pruning checklist that will improve your bottom-line and increase your cash flow right away:
1. Focus on the key of business success; the 3 Ps (People, Process and Product). If you want to have a successful business you must have at least 2 of the 3 Ps going for you and out of the three, People are the most important. Look at your processes with the intent to reduce mistakes. What can you tighten up or do differently to lower the chance of errors?
2. Focus on sales and marketing. The key to a successful business is high profitability and the key to high profitability is high sales.
3. Have a plan and clear vision. Decide on your strategy, set your goals and work on your tactics. Uncertain times call for certain actions. Successful companies are led by people with clear vision who can see the “big picture”. These leaders can project forward and imagine clearly where they want to take the company and articulate well their vision so those around them can see it as well.
4. Forecast your cash flow. Maintain a cash flow forecast so you can use it as an early warning system. The sooner you get an indication that your cash is tightening the more time you will have to take action.
5. Collect on past due accounts faster. On average how long do your customers take to pay you? Aim to reduce this by at least 10 days.
6. Run your business like a turnaround. When businesses are in trouble, turnaround consultants are hired to run a tight ship. Do the same, just don’t wait for your business to get into trouble. Take costs and expenses seriously, pay close attention to your business cash flow. Reduce or eliminate all nonessential expenditures.
7. Cut your bottom customers and focus on high margin business. Harsh as it may sound, concentrate on your best customers. Lavish them with attention. If you have unprofitable customers, cull them. You have no room for extra weight. Sometimes the core business has low margins. Many times, we get attached to the core business without realizing the damage done to the business and our customers. Develop a strategy for creating alternative services where margins are much higher, then maximize the volume of higher margin work.
8. Discard non-productive assets. If the current state of a past investment doesn’t produce, sell it and move on and bring some cash flow back into the company.
9. Reduce your product range. Do this by calculating which of you stock lines are your worst performers; sell those lines quickly to release some cash. Reduce your overall investment in stock.
10. Have a budget. Having a budget isn’t about cutting costs, it is about managing costs. Budget your expenditure for the year and track your actual costs closely (See #6 above). If you see costs starting to climb take steps to reduce your non-essential expenditure.