Strategy
Essential business advice with former bank manager Keith Farmer, now chief advisor at BFES
Before venturing into business or expanding into new products/services it is advisable to decide not only the amount of funding required but also how much you are prepared to lose.
You should always be in control and the loss you are prepared to sustain should not be such that it affects your life and that of your family. When you reach that loss you should draw a line and reflect on why you decided on that amount and what good reasons are there now for increasing that loss.
Some Tips for Success
Know where you are going: Have a strategy or plan. If you do not know where you are going how do you expect to get there? It needs to be a working document not a bottom drawer plan that is brought out once a year to show the bank. It does not have to be set in stone as market/economic factors can affect your original assumptions.
Neither does it have to be so detailed that the objectives and goals are so many and varied that none are achieved. It is better to have 2or 3 that are realistic and achievable.
In tough times a business needs to take a long-term view of the business they operate. The principles of strategic management and the development of competitive strategic plans are not just for the giant businesses of this world. After all most of them were small businesses once and they didn’t get where they are by accident. Know where you are: If you don’t know where you are how do you start on the right road? The following are a few questions that you should ask yourself and know the answers! - Are you profitable enough to sustain your living standards and provide for yourself, your family and your employees? - Are profits increasing at least above RPI? - Do you know what your gross profit margin is and is it going down? - Is turnover static/falling/increasing? - What is the future order book like? - Have you the resources/skilled workforce to expand? - Can you pay the wages bill next month without difficulty? - Do you know your break-even point and when do you expect to reach it? - What is your working capital requirement? - Would the bank lend you more money if needed? - What are your creditor days and are you taking longer to pay your creditors? - What are your debtor days and are debtors taking longer to pay? Know where you have come from: Have you kept faith with the core values of your business? Successful businesses do not abandon market strategies in tough times; they adapt to the environment and adapt the market strategy accordingly. If you diversify have you got the technical knowledge/skills to compete in the new market? How many corporate businesses have gone away from their core business to pursue the Golden Fleece only to end up with a carcass of mutton? Read the signposts on the way: It is important at all times to know what your customers want and what your competitors are offering. The products and services you offer should be constantly reviewed. You should know if your market share is falling. Are you losing long-standing customers and if so why and to where? Are you providing a product/service that your customers do not need? Are your products dated? These are just some of the questions you should be constantly asking yourself and especially in difficult economic times. Running a business is not easy and for small businesses can be lonely. Very few people have all the skills needed to run a successful business so it is vital that where skills are missing you employ people with them, undertake skills training or ‘buy’ them in from professional advisers.
About Keith Farmer
He offers advice predominantly to SMEs. Keith can be contacted on 01793 616284. |
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