Are you at risk of you becoming another business failure statistic?

Every person who has ever tried to establish their own company knows it’s a difficult challenge to carry out.  I’m in no doubt you know that more than 50% of small business ventures fail in the first 12 months & 95 out of every 100 fail within the first 5 years.  But, that statistic doesn’t alter much from year to year.  Why not? 

Many small business owners start their business ventures with nothing more than a “good” concept or product.  But business ventures remain viable because those who have the dream also know how to implement it and have solid industry background, or they engage experts who have extensive background and will endeavour to make them successful. 

The worry is that several businesses fail because the industry owners don’t have the industry and management experience to propel their dream to the next stage, and completely implement all of the components necessary to stay in business.

Numerous entrepreneurs are overly optimistic and overestimate estimated earnings and undervalue what needs to be undertaken in order to be successful.  One common oversight that new industry owners make is to never “let go” of several jobs that they are simply not competent in carrying out and believe they will save funds by refusing to ask for assist.

Don’t think you can do it all.  There will be tasks that you can’t or should not do by yourself and it’s alright to inquire about 3rd party help.

Part of doing business means allocating time to a large range of government driven paperwork and tasks, excise forms, and proper accounting, including goods and services dues and tax returns. 

Naturally, all you want to do is focus on why you began your business in the 1st place – carrying out what you like to do and being paid for it? 

I’m confident you’d choose to ignore  the bureaucracy and piles of paperwork .  However the reality is that it has to be done at some stage. 

You have 2 choices: Knuckle down and do it yourself; or get some help by outsourcing some tasks to people who will do it better than you.  When you do, you’ll have more time to focus on what you do best. 

As a newbie, you’ll need to ensure you meet the obligations imposed on you by government tax departments, health and safety, customer service and much more. 

Select a reputable partner that you can trust to make sure you lay a good foundation for your industry to build upon as it grows.

As you start to consider the workings of your own business, you’ll probably notice new things concerning your business.  Shifting your mindset and how you think about your company might shed new light and repeatedly present you the improvements you have been looking for.

You have at least set the ball in motion and began on the pathway to a completely new approach of undertaking business.  Don’t end now!

I challenge you to look carefully at your company and put into practice the changes you need to be successful.  Extend the limits of your imagination and do not be afraid to try something new.

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Why it pays to look after your existing customers

Over the last 10 years, I’ve learned numerous lessons managing my own businesses and also by consulting to my customers and by far the single most significant lesson is ensuring that customers stay happy.

The logic for this is watertight. Marketing people will advise you it costs between five to seven times more to win a new client than keep an existing one.

According to some, reducing customer attrition by as little as 5% may result in more profits of between 25% and 125% When times are booming and sales are strong, it is often easier to fill gaps left by a departing client. There’s also not as much of free time to identify explanations why the former customer left or do something to stop it.

As always, it takes a major recession like this one to prompt all businesses of the significance of caring for existing relationships and keeping customers loyal.

Challenging times are already most likely forcing your customers to ease costs and seek ways they can save. Establishing a concrete, trusting connection with them can lessen the likelihood of your company being top of the list of cutbacks. Keeping up a regular, well informed dialogue helps retain customers. Find out what they want and how the service could be improved.

To avert being intrusive, it’s always politic to ask them where and how they’d like to be approached and how often.  As soon as you attention, be ready to talk openly about everything that concerns them. Given the present crisis, this may perhaps involve anything from the awkward matter of a possible reduction in price to be alternative ways of working. However it could also identify other areas of improvement unconnected to the recession, such as how well your sales and marketing people are performing or how your customer’s account could be handled differently.

Companies should think differently if they are to emerge from this recession. Large or small, we’re in this slump together, so it makes common sense to operate in partnership with customers and suppliers to guarantee survival.

At Business Advsiory Accounting & Tax Services, for instance, it’s not just our direct clients that we care about as partners but also the businesses which supply us with our hardware; software, stationery etc. We might pass on any handy information to them on managing the effects of the downturn, for example, and they to us. The benefits of this are that we empathize where they’re coming from and what they’re doing to lessen risk in a recession, and vice versa.

While all this is going on, your service delivery should be be top-class so work vigorously to maintain an outstanding customer experience with clients, new and old. Develop and perfect every part of your offering from how you work to the quality of your products or services.

By pulling out the stops to help old customers, you’ll not only retain them on board but they’ll also pass the word about and help you secure new ones. And don’t forget to reward them for their loyalty: smaller companies may not be able to stretch to the expense of a loyalty card scheme but there are numerous little gestures you may make to keep them content.

Spending a small amount of money on your current clients now will be advisable in the longer term when this recession picks up.

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3 steps to grow your business

Small businesses can grow fast even in times of recession. 

Surprised to hear this? Owners of small businesses are constantly looking for ways and means to grow their business and increase their profits. Here is some very valuable information that will help both you and your business grow.

1. Customers are the key
The size of your small business depends on not only the number of customers you acquire, but also on the manner in which you fulfil the demands of these customers. In other words, it depends on the amount of goods and services that you are able to provide. So an increase in the number of customers will be of no use if you cannot meet their demands.

On the other hand, increasing the quantity of goods isn’t such a good idea if there is no increase in your customer pool. For your business to grow, you must get more customers, and also be able to supply to them.

2. Acquire more customers 
Developing an effective system of customer acquisition is also vital in ensuring sustained growth in your business. One of the fastest ways to do this is to ascertain how you have successfully managed to obtain customers till date, and increase your efforts in that particular direction.

Create a mailing list of your current customers, and keep them informed about special offers and promotions. Giving discount coupons and limited period offers for making referrals to your business will definitely please your customers. 

3. Employees – true assets of every business
Yet another method that can provide sparkling results is by motivating employees of your business to give ideas on business growth. Not only will this act as a morale booster, they  will also help generate some very innovative ideas.

If you follow these 3 steps, you can make your small business grow faster and bigger than you could imagine.

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Learn how to set SMART goals for your business

Setting SMART goals for business is important because being SMART is the only way to be to achieve any kind of success.

It could be a plan to promote a brand or achieve a sales target within a given time frame, setting smart goals is of paramount importance. Needless to say, the success or failure of any business also depends largely on the kind of goals that define it.

For those of you unfamiliar with SMART, here’s what it really means. SMART stands for – specific, measurable, achievable, relevant and time based. They, in fact, form the basis of setting efficient objectives.

Here’s a little about each:

>>  Specific: It is a very important element of business planning. Get straight to the point about what you want to achieve, when you want to achieve, the exact requirements and constraints, and above all, why you want to achieve the specific objectives. If possible, use percentages, figures, ratios and fractions to highlight your goals. For example: I want to achieve 20% more sales than I made last year.

>>  Measurable: It means that you should be able to measure your present performance against these objectives. So when you aim at a 20% profit margin you have a measurable objective.

>>  Achievable: Be realistic when you set targets, or else you might end up being very disappointed if you do not meet them. They should not be too easy or too difficult to attain.

>>  Relevant: Make sure the objectives you set are closely linked to your kind of business.

>>  Time based: Targets are of no use if they are not set within a given time frame. So when you say that you need to increase production volume by 500,000 units, make sure you specify the time as well.

Do you still believe that setting SMART goals for business is rocket science?

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How to spot if your business is declining

Much has been written about the current economic climate with some reports suggesting that the number of companies liquidated in New Zealand 2008 was up by 40% on the previous year.

Often, one of the hardest things for any business owner is to admit that their business is declining.  This article will help you spot some of the early warning signs.

The following list highlights some of the danger signs that should prompt you to take urgent action: 

*  You’re losing customers; increasing customer complaints or a loss of a key contract;
*  You consistently fail to meet sales targets & operating budgets;
*  You’re not paying staff on time or they resign to seek alternative employment;
*  Your accounts payables are not paid on time; your accounts have been put on hold or you  dread the ‘phone ringing for fear that it’s someone chasing payment;
*  You cancel insurance policies;
*  You are late paying your tax obligations or, worse still, do not pay them;
*  You deal with cash flow shortages by raising finance using your personal assets as security;
*  Your bank dishonours your payments or your account is transferred to the bank’s debt management team.

If you are experiencing just one or two of these problems, the alarm bells may be ringing from Invercargill to Cape Reinga, sounding that your business may be on a downward spiral.  And if your business is experiencing more of these, then you should take notice, immediately, before it’s too late.

Receivership or liquidation is likely to be a costly and very stressful process and is almost certain to end with negative outcomes for you and your company.  It’s also a common misconception that Directors can’t be prosecuted if you trade as a limited liability company.  Liquidators can, and often do, seek to prosecute a company’s Directors if they can prove that they have traded recklessly by continuing to trade whilst the company is insolvent.  Liquidators are often forced to sell assets at below market value for a quick sale.  They may also enforce personal guarantees that you have given.

To avoid the ramifications of this, you should consult with your professional advisors urgently.  Remember:  They have the skills and experience of helping businesses.  They should be able to develop an action plan and implement it to address these issues.  This will probably include:
*  Identifying ways to gain more sales;
*  Reviewing your existing expenses to develop appropriate cost reduction strategies;
*  Existing productivity levels to establish ways to measure and improve them;
*  Reviewing your working capital requirements to help remain solvent;
*  Reviewing your business structure, including your current staffing;
*  Developing realistic financial forecasts and plans to monitor business performance;
*  Securing short term funding by negotiating with your current bank or other lenders;
*  Looking at potential opportunities to sell or merge part or all of your business.

Their 1st step will be to facilitate your ability to continue trading for the foreseeable future.  You’ll stand a better chance if you are honest with both them and yourself.  You’ll need a documented business plan with realistic assumptions and financial forecasts as many lenders now insist that you have them. 

If you are in any doubt or are currently worried that your business is declining, contact your professional advisor immediately.

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Give yourself a holiday- free yourself from your business by systemising it.

Do you feel like you’re being held hostage by your business? 

Most small business owners start their business because;
a) they want to do something they’re passionate about; and
b) because they think it will give them more freedom in life by releasing them from the unreasonable demands of their boss.

After a few weeks, however, the truth hits them hard.  Running your own business is a whole lot more demanding than a full time job.  Instead of one boss, you now have ten; your clients, your suppliers, your employees, each with a different set of needs and expectations that have to be met by you. 

You are so busy running the business that you hardly have time for anything else.

But who ever said it has to be that way?  The key to running your business more efficiently and effectively is to systemise it.  Systemising means you have to establish an organised method of dealing with the different functions of your business – from employee recruitment procedures to financial transactions. 

You have to find a way to structure jobs in such a way that things will get done on their own, or efficiently by someone else.  The ultimate goal of systemising your business is so you have more time to concentrate on growing your business and to enjoy your life.

Systemising your business also has another major advantage to it.  When your business processes are organised and proven, there is a much smaller chance for errors.  Because interruptions or errors can be costly, both in terms of time and money, avoiding unnecessary slip-ups serves to improve the overall performance of your business. 

So how do you go about systemising your business? 

First, know that it doesn’t mean you have to re-invent the wheel on each procedure.  You just have to find out how each procedure is best accomplished, document it, and repeat it.  Here is how you should get started:

1.  Take a step back and look at the big picture.

2.  Identify the activities that always seem to go wrong, take up too much of your time, or create a lot of stress for you.

3.  Create diagrams for each activity which indicate:
•   the desired results
•   the workflow
•   accountable persons
•   appropriate timeframes
•   resources needed
•   measurable performance standards

4.  Think about how you can group tasks together and how you can delegate them.

Once you establish systems within your business, you’ll be so much more comfortable with how much better everything works.  You’ll have so much more time for steering the business, giving your customers the attention they need, and most importantly, to spend quality time with yourself and the people you love.

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Stop playing Santa- you’re in the business to make money

Words like “corporate responsibility” and “business conscience” have become quite the buzz of late.  Many people think that businesses have become too selfish and that, in their pursuit for profits, they should also give something back to society.  Now that all sounds good if you’re Bill Gates or Sir Richard Branson and can afford that level of generosity.  But what if you’re a small business owner just starting out?  How far should, or can, you go when it comes to being generous?

Many small businesses make the mistake of giving too much.  So much, in fact, that it ends up negatively affecting their bottom line.  In order not to let that happen, you need to have a healthy balance between profitable activities and generosity.  Here are some key mistakes that many small businesses make on a regular basis:

Free information.  Yes, it is important to provide people with information about your company, especially if you’re just starting out.  Therefore, many small businesses regularly send out tons and tons of free brochures or information packages about the products and services they offer.  But does the amount of business brought in by them more than offset their costs?  Instead of sending these types of materials out randomly, it might be a better idea to selectively send them out to people who have specifically asked for such information.

Free samples.  Consumers love receiving freebies such as product samples.  But product samples don’t always convert consumers into customers.  Handing out product samples can become quite expensive if it is not done strategically.  Only make them available to your best prospects.

Donations.  Charities will come knocking on your door to ask for donations at one point or another.  A certain amount of donations to charity are always tax deductible.  But you are not Oxfam and you need to limit your donations to a few selected charities.  Learn to say no once in a while.

Employee perks.  In a small business, especially if it’s a family business, the culture of paternalism is very strong and employee loyalty is highly valued.  Therefore, when times are good, business owners often reward the employees that have stuck with them by giving them huge pay raises and bonuses.  But what happens when times get tough and such employee perks are no longer sustainable?  What if sustaining them means your profitability will be in the red?  When rewarding employees, make sure that you have the ability to sustain those rewards even when business is slow.

When charitable acts start to eat away at your profits, they become bad business practiceA.  Be prudent with your generosity if you are still trying to get your business off the ground.  If you go out of business, you won’t be in a position to help anyone at all. So stop playing Santa, and focus on the profitability and sustainability of your business.

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Stick to the knitting – focus on your core business

Small business owners who are looking to grow their business are often tempted by the idea of diversifying into other products or services.  However, a countless number of business ventures fail utterly when their owners decided to diversify away from the core of the original business.  Expanding into other product lines or services takes a large amount of time, effort, and resources.  

When a business doesn’t have enough of these to handle the expansion, you end up with a situation where both the new and old ventures suffer.  This is particularly the case for newly-established small businesses that have very limited resources to begin with. In the early stages of your small business, it is vital that you stay focused on your core business and its true strengths.  

In order to make the most out of your limited resources, you need to identify what it is that your business does best and concentrate on it.  Related and unrelated endeavours will distract away from what your business does best.  Your business may be involved in many things, but there has to be something that it does better than anything else.  

The Coca Cola Company, for example, produces a myriad of different drinks, but its main product is undeniably Coke.  If the company were to stop selling Coke, it wouldn’t survive.  So how do you get clear about what your core business is?  

You can start by asking yourself these questions: 

1. If you were forced to eliminate all of your products and services, and could only keep the one that is most crucial to the survival of your business, which one would it be? 

2. Why would a customer do business with you instead of a competitor?  What does he get from you that he can’t get from your competitor or anyone else? 

3. What one product or service is so important to your business that you would be willing to lose some customers for it? 

4. If your best customer had to deliver a 30-second speech about your company, what would he tell his audience? 

Answering these questions will help you to define what your core business is.  When you concentrate on your core business, you maximise the value you deliver to your customers by satisfying a critical need.  You also build-up your reputation and you’re identified with providing a certain product or service.  

Your customers will be attracted to you because they know with certainty that you will deliver what they need.  This is the best way to become a leader in your market.  So stick to the knitting, and focus on your core business!

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You Don’t have to Have all of the Answers; It is okay to Seek Help Once in a While

If you are too proud to ask for help in your business, you are missing out on many valuable learning opportunities. Mentoring is an essential tool to utilise in business. Mentors, business associates, friends and family can all provide valuable insight to assist you in your business success. Mentoring is one of the best sources for quality information and business wisdom on an ongoing basis and is simple to arrange.

Choosing a mentor is an important decision. Start by searching for someone in your business field that is currently in the place where you would like your business to be. Ask for a small amount of their time on a weekly or monthly basis, either in person or via a teleconference. Mentors are generally business owners who have more experience than you, who have achieved a higher level of success and who can become a trusted advisor to you and your business; and, their time is often free.

As a business owner, you are generally on your own. No more bosses to ask advice from and often few employees to bounce your ideas off of. Every business owner needs to have a great sounding board and sometimes they need emotional support throughout their business journey. Read my article, Why it Pays to Have a Network of Advisors, for more information about choosing the best mentor.

Learning from the business mistakes that your mentor may have made may help you avoid those same mistakes while you are growing your business. A mentor’s perspective and past experiences will help you to propel forward quicker in your business strategy.

Business mentors can also offer you access to an extended social network, offering you and your business access to senior decision makers to help you along. People like to help other people, and mentoring is a primary way for successful business owners to give back to the business community.

Mentors provide you with a no pressure and no ulterior motive relationship. This level of openness fosters better communication and a comfortable learning environment. The establishment of trust is something that typically grows into a long term trusted business relationship.

Don’t be afraid or too proud to ask for help in business. Mentors are a tremendous resource for any business owner, at any stage and will help you go further than you would be able to go on your own. Seek out a mentor to begin moving your business forward.

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How to Set up Effective Terms and Conditions Before you Sell on Credit

Setting up effective terms and conditions can be a challenge for many small business owners when they are formulating their payment infrastructure. Extending credit can be an effective small business strategy as it allows your business to establish customer loyalty and to increase sales with customers who would not do business with your company otherwise. Consider the following tips when you are setting up your small business terms and conditions:

Understand the Legal Parameters
Each country has a separate standard for credit terms and you will want to familiarise yourself with those laws as you are setting up your small business terms and conditions. What are the legal requirements for customer returns or customer complaints? What are the customer’s rights and privacy laws in your country for small businesses? What disclaimers must your business post to do business with customers?

Establish Procedures
Establish systems and procedures within your small business and across departments to ensure a consistent business approach as it relates to terms and conditions. Consider what your current process is and what the gaps are when establishing procedures and practices in your small business. Define and set up a customer credit policy and communicate it to other team members to ensure a consistent work flow. Develop an application form and consider making it available on your company website for new customers to fill out when they are requesting credit from your business.

Establish a Credit Policy for Your Business
Establish a credit policy for your business which will include the circumstances that you will offer credit, the process to determine a customer’s credit and the terms and conditions that your small business is offering. Select and establish a collections policy for any customer that does not pay or is slow and communicate this process to all employees who would be involved to ensure consistency.

Create a Credit Term Discount
Consider creating a term discount for credit customers such as a 2% net 10 policy to encourage customers to pay their invoices early.

Establishing terms and conditions for your business will help to improve work flow and can enable larger customers who only work on credit to establish a relationship with your business. I encourage you to post a comment about your ideas or practices as it relates to effective terms and conditions that have been effective for your small business. Also, if you are not already a subscriber to my website, enrol to day so that you can continue to receive valuable small business tips such as this.

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