According to SARS figures, only 24% of South African companies that submitted tax returns in 2019 were profitable. That’s a scary number; and running a business in this economy is no small feat.
However, there are some simple ways to set yourself up for success, and this article outlines seven steps that can be adapted to businesses in any industry.
1. Know what you are working towards
Sett ambitious but achievable goals. A good place to start is quarterly and annual targets, which give you a sense of purpose and something to work towards as a team. To do this you need to understand what’s possible and where you can streamline your business.
2. Bring the experts in
Don’t try to do it alone. Consider an outsourced CFO or financial consultant who can spend a few hours helping you to figure out exactly what your business should be focusing on, in what detail and when.
3. Keep it simple
Once you know what to focus on, set aside time every week to update your financial spreadsheet, graphs or targets. Hold yourself accountable, or find someone who will, to ensure you stay on top of it all the time.
4. Get a bird’s eye view
Look at rolling quarterly and annual figures rather than focusing on the current or previous month. This will give you a good idea of whether you’re on the right track, or need to change direction.
For example, in our business we focus on revenue, net profit and % change from the same quarter the previous year.
5. Make it visual
Create simple line graphs and bar charts to give you a snapshot of key numbers such as revenue versus net profit or income versus expenses over time. It’s often useful to look at month-to-month figures as well as year-on-year.
6. Improve margins not volume
Before you take on more projects or clients, work out which ones are profitable, and how to restructure the ones that aren’t. This can be tricky, especially if you have a legacy of over servicing clients, but in the long run it’s essential to survive.
7. Keep culture top of mind
Don’t get so caught up in the numbers and their impact on your bottom line that you forget about why you started the business in the first place! Make sure your team adds real value to clients within the boundaries set, to ensure it’s financially viable to do so!
8. Encourage repeat business
By keeping clients happy, you’re likely to get repeat business and also referrals – so going the extra mile really is worth it. And it’s much more cost effective to upsell or cross-sell, rather than going out looking for new business.
For this strategy to be effective, you have to keep at it – set weekly or monthly reminders to stay on top of the numbers, meet with your management team and set clear KPIs to track your progress. There is no quick fix when it comes to creating a sustainable business with a solid foundation.
