So if you have this year-end, a question – have you completed your budget for the next year?

I’ve blogged before about how powerful budgets are but the thing I didn’t mention is that they do, and should, take a bit of time.  Since budgets are not just about putting a load of numbers together, or the classic – “let’s go for 5% higher profit than last year”.

I think that the planning for the budget is the most enlightening part, since it forces you to think about the business growth and how the marketplace is going to affect your business in the next year.

Question such as:

- What product or service line is the one to focus on?
- What product or service line do we need to stop?
- Who/when do we recruit?
- Have we got enough cash for our growth plans?
- What are the threats to our growth?
- How much do we need to spend on capital expenditure?
- What will be the product/sales mix in the year?
- How much should we spend on marketing?

and many more….

The point is, you won’t know all the answers and won’t be able to predict the future.  That isn’t what the budget is for.  The point is, you are forced to take a hard look at your business and assess the direction, strengths, weaknesses.

After all of this, you will be left with lots of numbers BUT the thinking behind them will have given you the insight into what works in your business and what doesn’t.

Tomorrow, how do you pick the profit target.

*Have you ever wondered why the personal tax year is 5 April and not a date at the end of month?  I’ll tell you the story at some point – I found it incredibly interesting, but actually most people will find it baffling and tiresome.

I’m 35 years old (I know, from my photo you would never have guessed), my sister in-law is 24 years old.  When I first saw facebook, I immediately thought of privacy and why I would want to read what people had for breakfast.  My sister in-law had no such reservation, she was on it straight away and not in a ‘hey, I’m on facebook!’  For her, it was as straight forward as using email or her mobile phone.

I’m sure social media is a generational thing (and I’m only talking a 11 year gap between me and my sister in-law – I think that is too small a gap to be a generation!) but I have been worried that I was on the wrong side of technology and that younger business owners would pick this stuff up quicker.  So….I got in to it!

I believe (and you can’t quote me on this because as made clear – I am not a social media expert) that social media will very soon, if it isn’t now, be as standard to a business as having a website.  It is social media, not business media but all the same, if you are not on social media and you run a business you potentially could be missing out on a huge opportunity in getting your voice heard.

I heard Brad Sugars, founder of Actioncoach, once say that social media was an ‘interactive database’.  I really liked this – at one time all your clients and contacts would be on a spreadsheet somewhere, locked away on a computer, now though, everybody can see who they are – no privacy at all.

When you throw in the word ‘testimonials’ to the mix, potentially you are looking at a whole new way of communicating client satisfaction to prospects. 

If you have any decent stories of how you have used social media to benefit your business I’d love you to email me at russell@rsaccountancy.co.uk

Then I read Jim Collins ‘Good to great’, a business classic which I’ve blogged about before.  One of the most powerful ideas in the book is ‘the hedgehog concept’, I’ll paraphrase it but it goes something like this….

The Hedgehog is fairly useless at most things, its small, can’t run very fast and doesn’t really do a great deal.  However, if a fox appears or any other predator, he does the one thing that he is good at, no, excellent at.  Actually he is the best in the world at it – he curls up in a ball and sticks out his spikes (not a zoological term) so nobody can eat him. 

It’s a great trick and one that will keep Mr Hedgehog alive.  It is the only good thing he can do but there is nobody that can rival such a brilliant protective technique.

As it is in business……

You will come across lots of people who will take 2 hours telling you everything they can do in their business.  The product and service line is a book in itself.  You will also have come across other people who say ‘hey I’m a solicitor but I also run a wedding planner business’ i.e. jack of all trades, master of none.  The opposite of the hedgehog concept.

So have a look at your business and ask yourself ‘what is your hedgehog concept’ – what can you be the best in the world at that nobody else can do.

It’s not an easy thing because taken to its logical conclusion you will eventually be turning away some customers, but it will save lots of time like it did me…..if you stick to it!

Bizarre blog footnote…….two days after reading about ‘the hedgehog concept’, I found a dead hedgehog in my garden that my cat (Mr Tibbs) had killed.  I thought it was a sign, but to this day I don’t know if it was confirmation that the hedgehog concept was a good thing or whether it was a bad thing.  I went with a good thing and its served me well.  I guess all hedgehogs end up being a bit slow to curl into the ball.

Great piece of ‘wisdom’ that is utterly useless if you want to grow a business and earn more profits.

The truth is, if you want to increase your income and grow your business you have to recruit team.  If you have a team, to grow further you will need more team.

Sure, I’ve read the ’4 hour work week’, but look at all the top business successes that you know – they will all have team and be a master at managing that team.

Personally, I think the team management part of business is by far the hardest, most fun and enjoyable part of the game.  I also feel a certain moral obligation to create employment given the unemployment figures.  However, if you want to look at it in purely business terms – if you want to be bigger, you’ll need a team.

Finding a team is one thing, that’s the easy part.  Finding a great team – well, that’s an art form.  I’ve been obsessed with recruitment for the last 3 years because it is those decisions that will have such an impact on business success.  Your team should be leading YOU to greatness, not the other way round.  You’ve got to hire people who are better than YOU, not the other way around.  If you honestly think you are the best person to do the work, then good luck to you, but you won’t grow a business.

Anyway, lets assume you want to employ that next person.  How do you know when the time is right?  Here’s a quick tip – if you believe you can afford 50% of their salary (you’ll know this by checking out your profit forecast) then hire them.  They will make up the missing 50% in their contribution to the business and in freeing you up to do the important stuff.

When a company is appraising its profit performance, the first number to compare the profit figure with is the budget (if there was one).  This will give an idea whether the business has performed to expectation.  The second number would be to compare with the prior year.  This will show whether the business’ profits are increasing or decreasing.

Both these numbers are easy to find and compare against.

The third number is potentially a more interesting number.  This would be to compare your profits to those of your competitors i.e. other companies in your sector.

This number is a little more difficult to find.

Not many people know this (unless you are an accountant) but if you have a private limited company by shares, whilst your accounts are indeed published at Companies House and available for all and sundry to view, the accounts are the abbreviated set which basically tells the viewer very little.  It is also impossible to truly tell what the profits of the company is.

However, there is a way to find this number…..

I have access to benchmarking software which effectively tells you how your profit compares to other businesses in your industry. 

So for example, I can tell how I rank against other accountants in terms of sales growth, gross and net profitability, turnover, debtors, cash, return on investment. 

The last time I looked at this myself, I ended up printing off a 60 page report and taking hours to dissect it (it was LOTS of fun!). 

These reports (although not usually 60 pages) can be produced for pretty much any sector and really do answer the question ‘how do I compare to my competitors’. 

If you are interested in finding out how you do compare email me at russell@rsaccountancy.co.uk

The systems around cash in a business are the most important systems but it is often a system which is overlooked. 

There are 3 main steps to getting more cash in your business….

Firstly, produce a 3 month forecast every month.  This will be time-consuming at first, but after a couple of months it will become easier.  It is essential for a growing business to know what is coming around the corner and be able to predict cash gaps and ‘surprises’.  It can be troublesome when the cash forecast is showing a dip at the end of 3 months, it is much worse if you predict it at the end of next week.

Secondly, cash problems in business are not really down to cash but down to the payment terms.  You want your payment terms to be as favourable to you as possible.  I would encourage any business to test this until you are blue in the face.  Don’t just look at what is industry standard, play around with different terms, be bold with it.  The difference between 7 days and 30 days can be massive.

Thirdly, it is a great step to have favourable payment terms but if you forget to invoice the customer then the cash will not come in.  It is very rare for a customer to helpfully to tell you that they haven’t been invoiced.  The longer gap between the sale and the invoice the increase or risk of payment problems.  Work on the invoicing/sale system which leads to cash so that there are no gaps, no bottlenecks, ensure it runs smoothly.  This may take some time (it could take 3-6 months and software investment) but it will be worth it.

The result of your efforts will be reflected in your bank account which is always very satisfying!

I’ve heard many answers on this, so I’ll try to give a balanced, thoughtful response to this difficult question by listing out all of the advantages and disadvantages

Advantages

Will encourage a culture of openness
Gives a whole picture to the team which could give them a deeper understanding of the business
The team may come up with ways to increase sales or cut costs that you may not have thought of
It could facilitate discussion around the different departments of the business that may lead to improvement
You could connect targets and goals to the overall profitability of the company
If your business is growing, it may give them a sense of pride
Hardly any companies do it (especially in small business), they would not have experienced it before
By trusting the team with the ‘private and confidential’ report they may respond with an increased level of ‘buy-in’

Disadvantages

Your team can see how much money the business owner makes

So there you have it, a very balanced argument to a potentially thorny and time-consuming issue.  Hope that solves it for you.

If I’ve missed any advantages, please feel free to let me know by email on russell@rsaccountancy.co.uk

First of all, pick a number that you want to increase.  It could be sales, sales leads, conversion rates, repeat business, number of transactions per customer, profit before tax.  It could even be a metric around operations or delivery.

Pick a number that you really want to improve, a number that will have a positive impact on the business.

Secondly, track it.  Find a way to calculate the number and then systematically track it.  It could be every week or every day, but get obsessed about knowing this number.

Do not do anything about the number at first, just track it to see what it does. 

Track it for 30 days.

After 30 days, sit down and make a list of all the ways that you think you could increase the number.

Here is the interesting thing about this exercise – you may not even need to get to the sit down part, since it is highly likely that your number (whatever that number is) will start to increase just by tracking it.  It’s a strange thing, but I have seen this in my business and my clients’ businesses.  When a number gets focussed attention, it just starts going up of its own accord.

Of course, what is really happening is that the behaviour and attitude is changing by focussing on the number but if feels very mysterious at the time.

So without any real action, just by tracking, you can increase your numbers.  When you get to the 30 days and then think about the actions you can take around the number, you will be even more motivated having already seen an increase in the number.

If this has happened to you, feel free to email me at russell@rsaccountancy.co.uk to tell me your story.

He may have a point but the fact is, in business, people will judge you on how you look and they will judge you quickly.

If I, as a chartered accountant, turned up at your office in jeans, it immediately gives a bad impression.  Why? Because you would be expecting someone in my profession to dress smart. 

I learnt this in the first week of being a trainee accountant when I got told off by my manager for walking down to reception to get lunch without my suit jacket.  He said that you should always be consistent with how you dress.  If you win a client dressed in a suit, you must always wear a suit, you must be consistent.

So for me, suits, smart shoes, nice ties are a must.  For you, it may be different but it has to be consistent.  Anything less smart than the first time you met, people will think (even subconsciously) that standards are slipping or you are not as bothered about them as you once were. 

So how far do you take this?  Do you have to dress consistently outside of work or can you get away with looking smart at work and dressing down outside.

I thought so, until something very bad happened to me (yes, what follows is yet another story that makes me look silly, this is the last one though for a while, my next blog will be a yarn that makes me look great!)……

At my business networking group on Tuesday mornings, I’m always dressed up smart.  However, I took a different view outside of work.  I dressed badly, basically.  It didn’t seem to matter since I never seemed to bump into clients or business associates outside of the office until one of my contacts bumped into me at the Kirkstall fair.

I was happy to have a chat with him, the only problem was that I was dressed in a Quiksilver hawaiian shirt and billabong shorts (you know, the ones that go past your knees).  In essence, the sort of gear a fourteen year old would wear. 

The conversation went fine and I thought nothing of it.

Until, I saw him at the networking group on the following Tuesday and he announced in front of about 7 esteemed colleagues:

“I didn’t know you were a skater”

The funny thing was that he wasn’t being funny, he was being dead serious.  I had to explain to the 7 colleagues how I wasn’t a skater but I just dressed like a fourteen year old because, well, I don’t have any clothes – who knows why!!!

Those clothes went to St Gemma’s.

Whatever you wear, be consistent!

Want to hear my best story at how I created a terrible first impression?

1999.  Trainee accountant heading for a first day at a new client for an audit.  Running very very late in my peugeot 106.  I get to a T junction and I’m behind a very very dozy driver.  This guy has plenty of time and space to turn right but he’s failing to take the opportunity to do so.  This is going on for about 5 minutes (it was probably less but it felt like 5 minutes). 

I’m running late, stuck behind this guy who doesn’t look like he’s going anywhere.  In my defense, I was only young…..and tired but basically….

I lost it!

I beeped the horn 3 times and did a mad gesture at him (I assure you, it wasn’t a rude gesture, more of an angry gesture).

The guy looks behind and at the next opportunity turns right.

Ten minutes later, I noticed that the guy was still in front of me.  And that’s when I started to get worried.

Sure enough, turning up at the reception for the new client for this first year audit, guess who the managing director is?

Yup, the driver in front.

Okay, so that’s how NOT to do it.

Here’s the brilliant, very effective tip that you may think is a little bit crazy but I assure you – this works…..

When you meet someone and you go to greet them….

1. Give them a firm handshake
2. Turn your hand 45% to the left (if you are right-handed) very gently bring the person closer to you and….(here’s the tricky bit)
3. Give them a smile and maintain their gaze for just slightly longer than is necessary.  I’m talking just an extra second than you normally would

Sound crazy?  If you try this, comment on the blog or send me an email at russell@rsaccountancy.co.uk  I assure you – this will give a good impression.