There is a saying that analysis can become paralysis if we continually sit around and ‘naval gaze’; in other words engage in self-absorbing behaviour. As a bookkeeper my experience with clients has shown that when it comes to analysing the financial aspects of the business, naval gazing is the activity least likely to be chosen! As we start this New Year, I want to challenge you to actually take the time to do some financial ‘naval gazing’ – I give you permission to do so!
Start first with your business expenses; what expenses are variable expenses and what are fixed expenses? Rather than just looking at the dollar value of the expenses, consider the percentage of the various expenses as a proportion of turnover/sales. Are there some expenses you could cut down on or is there another supplier you could use that could offer you better rates? For example, do you send your invoices out by snail mail, whereas it would be more cost effective to email the invoices electronically to clients?
What proportion of your expenses are allocated to the financial management of your business, such as a monthly subscription to accounting software like Xero? Are there some expenses that need increasing because the return on that expense would bring gain to the business? For instance, a subscription for a monthly content writing service that engages and attracts more clients to the business.
Once you have done some naval gazing of your expenses, turn now to your business revenue. Did you met turnover targets in the last six months? What sales targets or financial goals are you setting for your business in the next six months? Are there particular times of the year when turnover is higher and what do you do to maximise turnover in those peak periods of the business? What are the different income streams for the business? Could you add on another income stream by looking, for example, to productise one of your services; perhaps a DIY Kit that clients could use?
The key is it is not wise to put all your revenue streams into one basket. In today’s economic climate there is the need to be flexible and adapt to the changes and demands that clients are asking for and also consider the price points that clients are willing to pay. Do you need to increase your prices? Could you offer your product range in bundles or your suite of services as packages, rather than payment per individual product or service?
As business owners we need to remind ourselves that the financial management of our business is just as important as all the other aspects from customer service through to sales and marketing. By now your naval may be aching from too much gazing! However, this is a good practice to do at least every 3 to 6 months in your business – and then be brave enough to make the changes that are needed. The team at Bay Business Solutions can help you on this and will ensure you won’t end up with a tummy ache, nor a headache! Please give us a call if you need our help.