Do you know why your business is failing?
“Company A” – A real business scenario.
“Company A” is a retail business that has been in operations for 3yrs. During the first 6 months of operations the company experienced steady growth in all areas which led to hiring a number of employees into different departments and functions including an accountant to help capture transactions and keep records. The accountant is a very smart fellow with 2yrs prior accounting experience. He does a good job of ensuring that all payments and sales receipts are properly recorded in the accounting books. At the end of every month the accountant downloads the Profit & Loss report and balance sheet appropriately.
Everything had been running smoothly for about 2yrs. But there was a big concern for the business owner. A business that was growing rapidly and was getting close to profitability suddenly stopped growing in sales. Even though sales had reached its peak, the expenses and costs were going up. Nobody could explain to the owner the reason for the change in fortune of the business. The owner started suspecting that his employees were sabotaging the business and stealing his monies but unfortunately he could not find enough evidence to hold any of them.
Frustrated, he decided to sell the business to a group of investors who owned a chain of unrelated retail businesses. Within a period of 12months the company’s sales had grown three times and after another year of operations, the new owners decided to open 2 additional outlets. The new owners only hired a CFO, an analyst, and Marketing professional.
What did the new guys do differently that turned the fortunes of the business within a year?
1. Understand the key drivers of your business:
Before a business can grow its sales the owner needs to know exactly what drives the business. Key drivers are factors in your business that when they change, your sales also change. Examples of key drivers include Number of Customers, Number of new customers monthly, number of old customers who keep coming back to buy from you, Price of your products, Number of outlets, Number of affiliates and partners that your business have etc.
IF YOU DON’T KNOW YOUR BUSINESS, YOU CAN’T GROW YOUR BUSINESS
2. Profile your customers and understand why they buy from you:
For any successful business, the owners would have been able to profile their customers and target market, and thus made it easier to serve them.
Always accept the fact that not everybody can be your customer. So you need to profile your target customers and identify what you need to do attract them, retain them, and make them become your brand ambassadors where they will help spread your business through word of mouth. This is very important as it will greatly impact the amount of time you waste on unnecessary leads. Though, this does not mean that you should turn down other customers who are willing to pay for your product and services.
Understanding your customers also help you identify the best form of marketing to acquire new customers, and so you don’t end up wasting your limited funds.
CUSTOMER IS KING, AND THEY ARE THE REASON YOU ARE IN BUSINESS
3. Listen to what your business is telling you
For most businesses, once they start to experience growth they forget the process of acquiring and retaining their first set of customers. This process involves earning their trust and keeping it. Rapid growth most often leads to loss of quality in service and quality of product. So it is very important to ensure that you avoid this common problem. Always keep an eye on how your customers are reacting to any changes made in the business.
TO SPEAK THE LANGUAGE OF BUSINESS YOU NEED TO LISTEN TO YOUR BUSINESS
4. Have a budget or annual plan broken down to your key business drivers
Most Small businesses don’t keep budgets or financial forecast. It is very important to set a target for the year and clearly state how you want to achieve the target. The “how” is very important and must be as detailed as possible e.g. If a fashion retailer is targeting to earn a revenue of N10m in a particular year, then it must clearly state in details as to what particular categories will help achieve the set target i.e. how many shoes, bags, shirts, trousers are expected to be sold, to what category of people and at what average price, at what point in time. That way performance can be monitored as against plan and thus make it easy to identify reasons for variance and take necessary action as at when due.
YOU CANNOT MEASURE WHAT YOU NEVER PLANNED FOR
5. Have some presence online:
In today’s business world it is very important to have presence online for your business. The average individual carries at least one smart phone and thus your business is likely to engage them easily with its online presence. There are so many free social platforms (e.g facebook, twitter, instagram, Google+, Pinterest etc) that allow businesses engage customers and also let people know of the presence of your business and brand. There are also lots of online marketplace platforms that allow small businesses showcase their products to subscribers of such platform. Your online presence creates more visibility for your business.
YOU CANNOT SELL TO SOMEONE WHO DOES NOT KNOW YOU EXIST
6. Treat your staff as you will treat your business partners:
It is very important to note that no matter the strategy or plan a business has, implementation will fail if the employees of the business do not align and also take responsibility for its success.
Business Owners must ensure that their employees are truly part of their business and not just hanging on till the next opportunity comes along. It is therefore necessary to treat your staff fairly and provide them with adequate training and mentorship. Fair remuneration is relative to every business but transparency is encouraged as employees tend to be loyal to employers that appear to be more fair and transparent. If the business is doing well, compensate them. If not, let them know the challenges and ask them to help come up with possible solutions to grow the business. Always remember that you cannot do everything by yourself. A regular staff meeting (Weekly or Monthly) where they are allowed to contribute to the business will help foster employee-employer relationships.
YOU EMPLOYEES ARE THE LIFEBLOOD OF YOUR BUSINESS. KEEP THEM HEALTHY
These are some of the changes the new guys hired (led by the CFO) made to the business that turned around its fortune. The necessary changes required to turn around the fortune of your business might be more than mentioned as the nature of business is unique. However, there is the likelihood that most of the highlighted changes will also apply to your business.
We advise you to consult experts that can provide more guidance.
