By Peter Gearin
Jude Manuel knows all about creating successful businesses. The GeoOp chief operating officer has worked in a diverse range of industries over two decades, and was a former general manager of Lee Hecht Harrison and Seek in New Zealand. Her background is in driving business transformation and managing high-performing teams.
“Creating a healthy trades or service business takes time and patience,” Manuel says. “But many forget that once a business is up and going, it’s just as important to find the time to do the regular maintenance every business needs to ensure it runs as well as it should.”
The new year is an ideal time for small business owners and managers to monitor their company’s performance. Manuel says there are five areas worth looking at immediately to start 2016 on the right foot.
Manuel says the most important part of the budget is the revenue line. At this time of the year, business managers need to ask where the money will be coming from, and what factors will determine this. “You should plan for your revenue line to mirror the seasonality of your business,” she says. “It’s really important at the end of every month to review your planning – is your profit tracking where you expected it to be when you first set the budget?”
Manuel says good managers plan for unexpected costs by allowing some fat in the budget. “If the costs don’t eventuate, you can mark it down as more profit at the end of the month. It’s vital to keep on top of costs – whether they’re fixed (rent, staff) or variable (telephones, cleaning, electricity) – and capture and manage your estimated sales patterns, as this will help manage your costs.”
Manuel says the keys to successful budgeting are knowing what it takes to make a profit, developing an effective plan, reviewing results every month and being flexible enough to modify plans to suit different circumstances.
“Know who your customers are and where your business fits in with them,” Manuel says. “It’s worth remembering that it costs less to maintain your existing customers than it does to attract new ones. How do you provide extra services for the customers you already have?”
She suggests business owners need to consider using a range of social media channels. “Facebook can be a cost-effective way to market your product,” she says. “Many people think LinkedIn is only for corporations, but small businesses can use their LinkedIn profile for effective networking.”
Manuel says managers need to track the marketing money being spent to find new customers. “There’s no point spending money on radio if people find you on the internet,” she says. “Normally people come to you through the medium they’re in. It’s crucial to know the ideal customer profile for your business.”
She says successful marketers track customers and marketing spend closely, and know what their most profitable customers are consuming because this is where their marketing dollars should be spent.
Manuel says sales and marketing are intertwined, which means managers need to ask these questions: How many customers do I need to make budget? What do they each need to spend for me to make a profit? “If your current customers aren’t spending the average you expect [to make a profit], you’ll need more customers,” she says.
Keeping a close eye on the numbers and knowing what’s in the sales pipeline is important, too. “If you don’t have the numbers for the next quarter but you do for the next month, you have time to ensure that the following quarter will make budget,” she says. “If you’re going to fall short of the sales you need, you will need to consider your sales strategy. Do you do a quick-fire promo campaign? Do you offer a special incentive?
“There are plenty of opportunities for you to have a positive impact on your sales. It’s important to know where you’re at and what action you plan to take.”
Manuel says the keys to a successful sales plan are reviewing sales numbers every month, knowing how many jobs are needed to make revenue and profit targets and having a sales strategy to get back on track if a target’s going to be missed.
“Effective small business managers look after the people who look after their business,” Manuel says. “They know how important it is to have the right people in the right roles.”
Just as importantly, Manuel says, is to manage staff costs beyond normal salaries. “Carrying excess annual leave on your balance sheet creates risk,” she says. “Paying out someone who has accrued three months of annual leave could wipe out your entire profit for that month.” Knowing staff sick leave entitlements is also vital.
Manuel says paying staff for good performance is a great motivational tool. “Often managers give their employees a bonus attached to outcomes, especially if they’re on the road and are bringing in new business or leads,” she says. “It could be a monthly or annual bonus, a dinner out or a couple of tickets to the movies.”
The best way to track staff productivity is establishing key performance indicators, she says. “What are the three to five activities that an employee would be doing to produce the best results for your business? These will provide the basis for a regular conversation about their work performance.”
Manuel says successful people managers spend 80 per cent of their time and resources on their best people, reward staff who show initiative, learn to develop and delegate to employees and use key performance indicators to track productivity.
Once all other business factors are considered, cashflow needs to be managed effectively, Manuel says. “It’s a problem if you have invoice terms of seven days but you have debtors that are outstanding for 35 to 45 days,” she says. “If time to follow up on outstanding invoices is an issue, it may be worthwhile engaging a debt collector to pursue these. Many services handle outstanding monies in a way that will not upset your customer base.
“Of course, there are many cashflow issues under your control. If you have extra money in the bank in term deposits, make sure you’re getting a decent interest rate. Also, be wary of the rate you’re paying on credit card debt.”
She says that it’s important that a business lives within its means. “Although things sometimes come up that you haven’t planned for, it’s vital that you only spend money on things that you’re absolutely sure will positively impact your business,” Manuel says. “If you’re in the happy position where you have exceeded your profit line for the month, take that money forward and capture it. It means you’ll have even more profit at the end of the year.”
Manuel says the keys to successful cashflow control are tracking debtor days, knowing how much cash is on hand at all times, thinking before spending on credit cards and reviewing monthly and year-to-date results before opening the expense account.