Business Health Check #1 - Revenue
Regular business health checks are an easy way to spot problems before they happen.
Most business owners are extremely busy working on various parts of their operations, so without regular check-ups on financial health, they can easily lose control and become susceptible to financial problems. With that in mind, here’s a rundown of what you should be looking for during a business health check. Today we look at what we recommend is step 1 of every good business health check.... Revenue
Business Health Check #1: Revenue
Without control or a clear vision for your revenue streams your business will not be able to maintain profitability or be viable in the long run.
WHAT ARE YOUR GOALS/TARGETS?
Every business should have either weekly or monthly revenue goals to hit an annual target. These should be regular benchmarked against to see how you are tracking against those goals. If you have fallen behind your target, what can you adjust to going forward? If you hit your target, what did you do right and how can you maintain that into the future?
WHAT TO DO IF YOU DON'T HAVE TARGETS?
If you don't have a budget, make one now. Budgets help businesses predict the amount they’ll earn and ensure they have the financial means to cover fixed and variable expenses. You don't need extravagant software to build a budget. Keep a simple spreadsheet handy, so that you can continue to monitor your performance against budget and make adjustments as the weeks/months progress. If Excel and numbers are not your thing get in touch and we can help!
WHAT IS YOUR BEST SOURCE OF REVENUE?
Not all your sources of revenue will be equal. Whilst it is great to have multiple revenue streams or sources it is important to know them inside out, so that you can dedicate your time and resources into those that make you the most money.
WHAT TO DO IF RESOURCES ARE SPENT ON LESS PROFITABILITY TASKS?
If you find during your business health check that you are spending too much time and energy into a revenue stream that is inefficient, plan a slow exit strategy away from that stream to focus on growth in areas. If you see that too much time is going into non-revenue generating tasks such as bookkeeping, accounts receivable, answering phones, website maintenance etc. consider the time spent per week on these tasks and how much revenue you could have generated if you had that time back. Compare that missed opportunity to the cost of outsourcing and see if it might be more profitable to focus on revenue growth.
UNDERSTAND THE IMPACT OF YOUR CUSTOMER BASE
Do you have any customers who drain you of energy? The ones who constantly ask for discounts or scope creep? If not, fantastic keep up the good work but still continue to read on in case you ever do. When it comes to your revenue, they may be costing you more in lost time and motivation than they’re worth. A business mentor of mine's first bit of advice to me was not to take on every piece of work that comes through. And when starting a new business, this might not seem like a great idea, as you try and increase your reach. But some customers are not worth the headache and use of your resource that they may cause. Keeping or taking on bad clients/customers can actually hold you back from reaching your full potential.
WHAT TO DO ABOUT IT?
Scoping out your prospective clients to see if they might fall into this category is a very important part of determining what work we look to take on. Back your gut. If you think a customer may not be worth the hassle, trust yourself! If you have already taken on a client that falls into this bucket, politely explain your situation, offer a referral to a competitor and be professional. On the flip side of this, don't be afraid to ask for referrals from your quality clients. Some people find asking for referrals uncomfortable, but you make it a habit to ask every satisfied customer for one. Most people are more than happy to help if they are happy with a product or service, you just need to let them know how.
That's it for today's business health check step. If you'd like to know more about Revenue health checks or budgeting/target setting get in touch. Next week we will be looking into Expenses