All you know is wrong…

In News by Charlotte Noble0 Comments

The language of business is numbers, a business can look good, feel good and even taste good; but unless the numbers are right – you won’t have a business, you’ll just have a very expensive hobby…

My challenge and opportunity therefore is to make your business numbers as compelling and exciting as the passion you have for every other aspect of your life; so here goes…

Here are my 7 Contradictions that will help you become truly successful…

Contradiction 1 – Profit is not your Objective.

Your objective is to build your business to achieve what you want. Once you are clear on exactly why you are in business, we can make a plan. Now while of course you need to make a profit in your business, profit is simply a barometer that lets you know how you are doing, your focus and attention should be on the causes of profit – your objective is to understand what causes profit in your business and manage them so that you can achieve your why.

Profit is your Objective when you know why, and how to generate it…

Contradiction 2 – Cash is not King.

Cash will produce approximately nothing while it is sat in your account, it will make you feel good and able to sleep at night, but that is all. Cash should be invested in assets and resources that give you a return. For example, the only reason you should pay a wage is because you get a better return on the investment than leaving it in the bank or trading on the markets. It is how you invest your cash that is King, not how you store it. When your cash actually works for you, you will make sure you collect all that is due on time, every time – it will be really expensive when you don’t…

Cash is King when it is invested well…

Contradiction 3 – Growth is not Good.

Plenty of profitable businesses close down because they simply grow too fast, they cannot keep pace with the investment required. Imagine a business with revenues of £5 million in 2009 that grows steadily so it achieves total revenue of £6 million in 2010. That’s just a 20% increase; but if in January 2010 the sales were around £420k (about 1/12 of the £5 million), to achieve £6 million during the year, assuming steady growth, the sales in December 2010 would need to be around £600k – compared to January that is a change of 42%, not 20% and even if growth stops there – the business will have a running rate of £600k per month, or £7.2 million a year – growing a massive 71%.. Understanding the implications of growth is fundamental to your success – 20% growth = 71% bigger…

Growth is good, only when it is managed and understood…

Contradiction 4 – Big Contracts are Bad.

I have a rule that in any of my companies, one client should represent no more than 10% of my profits. Winning a big contract looks very attractive, especially when you are going for growth – they can be the worst thing that happens to a business. Watch out for tight margins, extended payment terms, and queries raised on your invoices from eager employees’ in their Purchase ledger department. If you do go for a big contract, make sure you keep marketing to find others that will dilute their control over you – don’t allow a customer to have more control over your business than your shareholders

Big Contracts are great when they contribute to your business not overwhelm it…

Contradiction 5 – Avoid Discounting.

Never ever discount your prices – and don’t be fooled by Manufacturers Recommended Retail Prices either… If you make 50% gross profit on an item, and you offer a discount of 25% you will instantly cut your profits in half on every sale. This means that in order to get a benefit from the offer you have got to sell more than twice the amount you would have done at the full price – sounds like working harder to stand still to me… If you put your prices up by 10% on the same item – you could afford to sell fewer and still make the same profit – there are always choices when it comes to pricing, and maintaining your margins is the art of a successful business.

Pricing is the essence of your success – protect your margins wherever possible…

Contradiction 6 – Overheads are Good.

Very few people build a great business by simply cutting costs. Your overheads are usually made up of the salaries and wages of your team, premises costs and other operational necessities. They are not overheads when they all give you a positive return on your investment – see Contradiction 2. When every team member gives you a positive return, you can hire as many as you like, when you pay rent for a great location that generates business for you, open more branches in similar locations. Every line of overhead should be viewed as an investment from which you need to get a return – your insurance broker should pass you referrals, so should your bank and telephone provider. When every overhead is truly working for your business – overheads are indeed good.

Overheads are bad – only when they are out of control…

Contradiction 7 – Accounts is boring.

I love looking at my accounts – now you may say that I need to get out more, but once we understand our business, we can actually start to enjoy looking at how our business is doing. Your accounts should be regular, monthly for the full management accounts but have daily and weekly numbers prepared that will show you what is happening. Select a range of indicators that will let you know how everything and everyone is performing. Marketing, service and operations should all have measures and performance targets to achieve – that will mean when you look at the accounts you will be pleasantly surprised and not unduly shocked.

Accounts are exciting when they tell you good news…

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