10 financial mistakes all new business should avoid 1

Stress business woman

Starting a new business is always a challenge but there are some common financial mistakes that all start ups should avoid.

  1. Lack of Planning – Businesses normally start with a great idea but you need to have business model that works and to at least have a basic business plan and cash flow.
  2. Over Trading – this happens when a business expands too quickly for its working capital, when you start a new business its tempting to accept every order without considering whether you can have the resources and the cash to deliver.
  3. Wasted Marketing and Advertising – new businesses are an easy target for marketing companies but its important to stick to the essentials to start with, having a website, e mail and business cards are essential, magazine advertising and other things can be done as the business grows, in the early stages you are experimenting and finding your market so if you spend too much too soon you might promote the wrong things at the wrong price.
  4. Wrong Business Structure – Before you start your business get some advice from your accountant, its important to choose the right structure not just for tax reasons but also for investment and ownership.
  5. Wrong Staff – Choosing the right team is critical for business success, choose staff that have the right skills, the right attitude and are dedicated to the success of the business.
  6. Over Ambitious – All too often businesses plans are over ambitious with sales growing rapidly, often they prove to be unrealistic, when preparing a sales forecast start with your order book and be cautious in your assumptions.
  7. Overheads – Many businesses over spend on overheads for example renting premises too early, work from home, if you can, to minimise costs.
  8. Stock Problems – Buying the wrong stock, under or over stocking are also issues for start ups, try to adopt a ‘just in time’ stock policy.
  9. Getting Paid – A sale is only a sale if you get paid, any one can give things away, make sure you manage your clients and get paid on time.
  10. Competition – Keep an eye on your competitors, they will be watching you and responding to maintain their market share.

steve@bicknells.net

15 ways to improve profitability 5

Profitability

Profit is vital to every business, what is the point of being in business if you don’t make a profit?

So here are my tips on how to improve your profitability:

  1. Weed out loss making products, clients and departments – concentrate on high margin products and services
  2. Reduce Employment Costs – use Freelancers instead of Permanent Employees where appropriate
  3. Use Virtual Communication Technology – meetings can be held over the internet with Skype or other systems, it will cut traveling time and costs
  4. Use Social Media and Networking – marketing can be costly and the results can be hard to measure, use your contacts to generate leads and sales and always ask for referrals
  5. Increase Productivity – eliminate wasteful and unnecessary processes, I was told it used to take 17 people in the NHS to change a light bulb on a hospital ward (requisitions, approvals, payments, changing the bulb…) the solution to cut wasted processes was to keep a stock of bulbs on the ward
  6. Negotiate with suppliers – always look at ways to reduce cost including using alternative suppliers
  7. Understand your clients requirements – the client knows what he wants and what represents value, if you deliver value you will get more business
  8. Seek add on sales – what other products or services might be useful to your existing clients
  9. Keep an eye on your competitors – competitor analysis will enable you to understand differences in price, distribution, market and demand
  10. Find New Markets – use market research to expand into new areas
  11. Decrease Overheads – analyse all of your overheads including Rent, Rates, Utilities – could you sub-let part or your premises or reduce waste
  12. Reduce Stock Levels – can you turnover your stock more quickly or buy to order
  13. Improve your Cash Cycle – reduce slow payment by debtors, invoice promptly and settle disputes quickly
  14. Invest in Technology – automate processes with ERP systems
  15. Use Key Performance IndicatorsKPI’s help you achieve your goals

steve@bicknells.net