We have seen sports teams start a season with much hype and enthusiasm only to falter and lose their way much to the disappointment of their supporters.
This season’s Blues Rugby team and the Mumbai Indians IPL cricket team are examples of such disappointment.
The lessons that coaches, players and managers learn from such disappointments can equally apply to business.
Whilst a sports team has time to rebuild during the off-season, no such luxury is awarded to those in business. Owners must take the field each day and be sure their game plan is working.
So, what are the essential elements that business owners and managers must use in their game plan?
Understand your clients and customers: Do not assume that the customer will always be loyal to you.
You must ensure that you are supplying or delivering the product or service that customers want in a way that makes them feel special.
This could be as simple as a hand-written note on their statement, thanking them for always paying on time or a $2 scratchy and a card on their Birthday.
Share the love: Given the current slow growth of the economy, the quickest way to increase sales is for a business to attract customers away from its competitors.
Therefore, make sure that you are giving your customers all the love and attention they deserve. You should also remember that the cost of getting a new customer far exceeds that of retaining an existing one.
If you cannot measure it, you cannot control it: This applies equally in business as in sport. If there were no statistics on the missed tackles, lost lineouts or turnovers, the Blues’ coaches would not know what areas of their game required the most attention.
You should be able to extract key statistics from your accounting system, which at a basic level could include sales or gross profit compared to last year and expenses compared to last year.
Other areas that business owners can look at to monitor performance could include (a) productive hours of staff (b) sick days taken (c) refunds or credit notes issued (d) ageing of creditors and debtors and (e) turnover of stock and stock aging
One tool that we encourage business owners to use is a monthly ‘dashboard’ of results. We start by looking at some easily measurable data and show this in a number of graphs on a one-page monthly report.
As owners get familiar with the data, we find that they are able to manage these aspects of the business. Over time, we replace those areas that have improved with others to monitor and manage.
Staff retention: Retaining key staff leads to better business performance. However, staff need more than pay to be motivated to perform well.
Regular staff meetings where feedback is encouraged as well as regular performance reviews and training will make them feel greater attachment to the business. A happy workforce will be more inclined to put in extra effort for you when required.
Don’t kick it, Pass it: Whilst it is easy to look at reducing costs, be mindful that making increasing sales often requires an increased level of expenditure.
Do not focus on cutting expenditure, but focus on the efficiency of your spending – is there a better supplier, can you get better terms, is it better to lease rather than buy?
So, do not kick your expenses to touch but spend time analysing areas that are not essential and where you can get a better deal.
While there is no halftime break or off-season to allow business owners time to rebuild, there are a number of areas that owners need to consider on a regular basis.
Andrew Hill is a Partner & Business Advisor at BDO Auckland, which is a part of the BDO network of independent chartered accounting and business advisory member firms. Email: Andrew.Hill@bdo.co.nz Website: www.bdo.nz
The above is a general overview and it is essential that you talk to your own accountant to clarify any expenditure you are contemplating.
