Profit Improvement

If you don’t calculate your break even point you can’t make informed business decisions on pricing your product or services to ensure you are generating a good level of profit.

To cover the costs of your business you need to sell enough goods or services to reach your break even point.  Knowing where that point is, and how long it will take you to reach it, can be fundamental to your success.  This is especially true if you’re thinking about starting or buying a business.

Calculate fixed and variable costs

The first step is to establish your fixed and variable costs from which you can calculate your break even point.

Fixed costs – how they affect your break even point

Fixed costs are bills your business always has to pay, regardless of its level of sales.  Also known as overheads, they could include:

• Salaries for permanent staff
• Rent on your premises
• Insurance
• Interest on debt

Variable costs – how they affect your break even point

These increase with your level of sales – for example, the cost of materials and production.  Others include sales bonuses, part-time wages and freight.

Now work out:

• Total fixed costs for the year
• An average overall variable cost for each product or service sold (the variable cost per unit)

Some costs might be a combination of fixed and variable such as a phone bill split between a line cost and call charges.  Separate these bills into fixed and variable parts for greater accuracy – this will help you in calculating your break even point.

If separating them is too time consuming, choose which element is greater and classify it accordingly.  For example, if you don’t make many calls to mobile phones or outside your local area, you’d classify the phone bill as being a fixed cost.

How to determine your break even point

Let’s assume you manufacture shoes with the following details:

• Budgeted fixed costs of $60,000
• Average cost to make a pair of shoes is $110
• Average sale price per pair of shoes is $250

Calculating your break even point requires the use of a few formulas:

1. Sales price per unit ($250) minus variable costs per unit ($110) = contribution margin per unit ($140)
2. Contribution margin per unit ($140) divided by sales price per unit ($250) = contribution margin ratio (0.56)
3. Fixed costs ($60,000) divided by contribution margin ratio (0.56) = break even sales volume ($107,142)

Based on these calculations, if you sell more than $107,142 worth of shoes you’ll make a profit.  That equates to 429 pairs.

Using your break even point

Once you have worked out your break even point, the next step is to work out whether the sales volume you will need to break even is realistic and achievable.

You can also use your break even point calculation to see the effect changes in costs has on your business.  If you were able to source cheaper materials and reduce the variable cost per pair of shoes, you’d need to sell fewer pairs to achieve your break even point.  If your sales remained the same, you’d make more profit.

To be of real value to you, your fixed and variable costs calculations need to be accurate, so it’s worth investing time to work out your figures accurately.

For an in depth explanation on break even point, check out what Wikipedia says!  If you find this confusing, we can help.

If you need help to gain profit improvement and calculate your break even point, call us today on 9204 3733 or  Contact Us – we will be happy to help.  We can offer our Management Consulting service which assists our clients to achieve profit improvement and calculate their break even point.

How to achieve business growth with better time management

When things are hectic, most small business owners wish they could find a way to fit more than 24 hours into a day.

Often, your ‘to-do’ list can get so long that you feel you never give as much attention to every task as you would like.  It can also mean spending more time in the office or dealing with work issues after-hours which cuts into your free time and affects your work-life balance.

Applying these simple tips for business growth with better time management will help you get the most out of your work time and get more of the important stuff done.

Track your time

Remember:  You can’t manage what you don’t measure.  This applies to your time management.  Without tracking your time, any attempt at improving time management will be a hit and miss affair.  If you don’t track where and how you spend your time, you have no way of measuring your efficiency or identifying time wasting tasks that could be improved upon or delegated to others.

Start by recording what you do each day and how long it takes you.  This can be as simple as writing roughly scribbled notes or harnessing your software technology to do this for you.

Before you write off this idea and decide that it will be a waste of time and effort, try one of the range of time management tools available such as Harvest or Toggl which have features that can be rolled out for overall time management and can be integrated into your billing processes.

If you implement a programme to continually monitor and track how you use your time, after a few weeks you’ll have a good indication of what you spend most of your time doing.  You might be surprised at the amount of time that is lost in meetings, doing things you could delegate, or on things you do out of habit rather than need.  Then you can make changes and benefit from business growth with better time management.

Eliminate the time wasters

Armed with information about how you spend your time, you’ll be better able to eliminate unnecessary time wasters.  Some common time wasters are:

• Monitoring social media
• Responding to emails
• Fielding telephone calls
• Drop-in visitors and sales people
• Meetings that go on longer than necessary

Jumping between tasks to read and answer emails as they come in during the day can reduce your productivity.  Set aside time to check and answer emails rather than let them distract you from the tasks at hand.

If you need uninterrupted time to focus on a task, ask your staff to field telephone calls and take messages.  Also, instruct staff not to allow people in to see you without an appointment.

There are a number of other ways to manage time more efficiently – e.g. don’t have pop-up messages from social media accounts running while you’re trying to get work done.  Also, rather than spending hours each week monitoring certain business functions, appoint a staff member to do this and report back to you on a daily or weekly basis.

Keep meetings brief and to the point.  Draw up an agenda and stick to it.  Be firm and only allow a couple of minutes for each item to avoid meetings becoming a social event, thus wasting the productive time of all those present.

Delegate appropriate tasks

Have a close look at your current workload and see if there are suitable tasks you could delegate to others.   Consider delegating accounting functions such as managing petty cash and reconciliations, plus general correspondence, sales and marketing, product development, quality control etc.

People in business are notorious for their reluctance to delegate.  However, delegation can free up your valuable time, allowing you to focus on growing your business rather than spending all your time on the day-to-day running of your business.

Draw up a list of tasks you could delegate to responsible staff.  Many employees want to advance in their jobs and would value the opportunity to learn new skills.

Try not to fall into the trap of only delegating the jobs you don’t really like doing – you want to free up as much time as possible to allow you to work more strategically and efficiently and have time for that work-life balance.

Get organised

A little bit of time invested now in developing efficient systems for your business will save you a lot of time in the long run.  Whether it’s time spent setting up a computerised accounting system, or implementing an electronic filing system for your documents, setting up systems and getting organised can save you a lot of money.

If your time tracking indicates you spend a lot of time answering queries that could be delegated, save time by creating procedures for your staff so they can respond on your behalf.  Similarly, adding an FAQ page to your website could help to free up more of your time.  Customer relationship management software can also save a lot of time and effort.

By being more organised, you’ll no longer be busily running from one problem to the next, you’ll be working smarter, rather than harder, and staff productivity will increase too.

Draw up a prioritised ‘to do’ list

It’s easy to become bogged down in problems, but a simple ‘to do’  list of the tasks you need to accomplish, together with a deadline, will help to keep you focused.

Ranking tasks in order of priority will ensure that the most important ones get done first and that others don’t fall off your radar.  Ticking items off your ‘to-do’ list can be surprisingly motivating too.

Work within your energy levels

We all have our highs and lows, so it makes sense that you will perform well when you are at your best.  If you’re a morning person, use this time to tackle the big tasks and schedule more routine or less creative tasks for the afternoon when your energy levels are lower.

If you’re not a morning person, concentrate on the routine tasks first thing in the morning, then tackle the big ones when you’re at your best later in the day.

Get the tools or help you need

If you expect your staff to work effectively and efficiently, you’ll need to provide them with the right tools to do the job.  The same applies to you as the business owner.  You can’t work efficiently if you don’t have the right tools and staff.

It doesn’t mean that you have to rush out and buy the latest technology, but having the right tools, software and training in place will save you time and money.  A cost analysis will quickly tell you whether the investment is a financially sound one for your business.

If you need help to improve business growth with better time management, call us today on 9204 3733 or  Contact Us – we will be happy to help.  We can offer our Management Consulting service which assists our clients to achieve business growth with better time management.

It’s the little things that, when put together, make up the big things.  Here’s a list of daily habits you can adopt to improve your business growth.  Some of the movers and shakers in the world today live by this creed and it seems to work for them!

We’re not suggesting that you strictly adhere to these habits, but they could directly improve your business growth if followed every day.  We follow some of them and it certainly helps our business.

1. Stay Healthy

Good health is vital for good performance.  Without it, your performance (both personal and business) will suffer and you will only accomplish a comparatively small percentage of what you could otherwise achieve.  Like a dedicated athlete who needs to count kilojoules, log kilometres, and track their PB, a good business operator has to stay on top of their health to make good business decisions and accomplish more.  It all starts with managing your health.

2. Value Leisure Time

The greatest leaders have always known how to make time for themselves.  They understand that their priorities need to be properly managed, so they make sure they enjoy their leisure time.  They have perfected the art of relaxation, enabling them to handle the demands of their day to day business life.  If you are constantly running out of steam you won’t be able to withstand the demands of managing your business, so take time out for yourself.

3. Check Your Finances Regularly

You may manage your own money or have someone who manages it for you, but either way you need to keep a regular watch on your finances to stay on top of things.

4. Stay in Control of Your Emotions

Good leaders know how to manage their emotions and recognise that expressing anger never accomplishes anything, so they turn it into a positive action to enhance performance and relationships.

5. Show Your Appreciation to Others

The best managers know how important it is to maintain good relationships, particularly with their staff.   They understand the need to recognise a job well done and that morale is boosted by positive feedback.  Without this, no one will really want to work hard and strive to do better.

6. Improve Your Skills

Always look for ways to improve your business performance.  Regularly check your personal skills plus those of your staff to see if anything needs improving.   The smallest of changes that you make today could enhance your business performance tomorrow.

7. Be Open and Listen to Feedback

Good leaders recognise that they don’t know it all.  They seek feedback from others and take it on board to enhance and manage their business more effectively.

8. Seek and Be Open to Advice

Few businesses have become successful without seeking advice from others.  No one is an expert in every area, which is why it is important to seek the advice of others who can pass on their knowledge and guide you in building your business.

9. Treat Failures as Learning Curves

Learn from your mistakes by adopting a positive attitude and implementing the necessary changes to enhance and improve your business growth.

10. Welcome Adversity

Realistic business people expect difficulties to arise from time to time.   If you are wise, you won’t see this as adversity – you will use it to motivate you to keep moving forward.

Conclusion

How many of these daily habits do you practice?  Don’t be afraid to adopt any or all of them to improve your business growth, then decide which ones work best for your business.

If you need help to improve your business growth in Perth, call us today on 9204 3733 or  Contact Us – we will be happy to help.  We can offer our Management Consulting service to assist.

10 more quick growth tips for your small business

Help grow your business through collaboration, expansion, improved marketing and some of the following growth tips for small businesses Perth.

1.      Improve your customer service

Businesses with good customer service retain customers and attract new business through word of mouth.  Even if you think you’re already providing a good service, make it a priority to provide refresher training to frontline staff at least once a year.  Alternatively, hold regular meetings to discuss any issues as they arise.

2.     Try out new products

Even if you have multiple products selling well, be on the lookout for opportunities to expand your product line and satisfy customer demand.  If you’re unsure how well a product will sell, order a small amount first.  Just remember to update your marketing material to let customers know about your new offerings.

3.     Rejuvenate your marketing material

Holding on to old, outdated marketing material can make your business appear out of touch or even unprofessional.  Review your marketing material at least every 12 months.  If you’re on a limited budget, focus on producing basic material that is stylish but functional.

4.     Enhance other people’s good ideas

Be aware of great ideas or new ways of working from other businesses and think about how you could adapt them to your own business.  The best ways to find out about new ideas are to research the latest trends in your industry, subscribe to industry publications, attend conferences and keep up to date with your competitors’ websites.

5.     Team up with another business

Joining up with another business to promote a special deal or offer is a great way to get your business into new markets with new opportunities.  Another option could be getting your business listed on another business’ website or in an industry directory.

6.     Test your marketing ideas

Before you implement a marketing campaign, test it on a limited basis and fine tune it before a full-scale rollout.  The easiest way to do this is to target selective customers and see if you receive a response.  Ask your best customers for feedback before implementing any marketing ideas.

7.     Create regular customers

Keep a record of client names and details for future marketing material or special offers.  Starting up an e-newsletter is also a good way of keeping in touch with clients – just make sure you have their permission before hitting the send button.

8.    Consider expansion

Think about whether your current premises will meet your needs over the next five years.  If you’re looking to target new customers, will your current location appeal to your new target market?  Keep an eye out for competitively priced lease arrangements or deals on neighbouring properties that could enable you to expand your current location.

9.     Guarantee your products and services

If you want to build future sales through repeat customers, you need to make it clear that you stand behind your offerings.  A good way to start is to offer a money back guarantee for any product sold, or to back up big sales with after-sales support.

10. Pay attention to your customers

Take any feedback from customers seriously and make an effort to thank them for sharing their thoughts (even if they are raising concerns or making a complaint).  If you have a regular customer who isn’t happy with a new marketing strategy or product line, listen to what they have to say – there’s a chance that other customers might share their concerns.

Don’t be afraid to try new ways of generating growth.  Consider the above tips and decide whether they can help enhance your overall product or service.

If you need help to improve business growth in Perth, call us today on 9204 3733 or  Contact Us – we will be happy to help.  We can offer our Management Consulting service which assists our clients to achieve business growth in Perth.

Business Growth in Perth

10 Quick growth tips for your small business

Small businesses can grow in boom times as well as periods of difficulty by working smarter and taking advantage of opportunities. To help business growth in Perth put these following effective tips into practice to help grow your business.

1.      Utilise new technology

Modern technology can save you time, improve productivity and reduce your operational costs. Make use of Facebook, Twitter, Google+ and other social media tools to market your business and help business growth in Perth.

Dropbox is a cloud-based service that can be used for document creation and sharing, while Skype is commonly used for calling or video conferencing.

2.     Communicate better

Always take a friendly but professional approach to any form of customer interaction including written invoices, quotes and emails. Create guidelines for dealing with customers, both in writing and over the phone. Reply to messages as soon as possible. If you take too long to return a call or email, you may lose a potential customer to a competitor.

Try writing a blog or column about your chosen industry. Think about sponsoring an event or gifting your products or services to a local sports team, community group or school.

3.     Become more innovative

Even if your products and services are selling well, always look out for new ways to refine your business. Organise regular brainstorming sessions and invite staff to share their ideas on ways to improve products or services and help business growth in Perth.

4.     Tighten up your credit policies

Make sure your customer completes a credit application and that they understand your terms of trade. Encourage your customers to clear payments quickly by emailing or posting invoices and giving them a clear time frame to pay. Revisit your terms of trade and make any necessary changes if need be.

5.     Improve your record keeping

If you’re selling products, keep a record of every product sold and ensure you’re aware of how much stock you have. There are free or low cost point of sale computer programs that can manage stock inventories and provide a record of each product sold. Create a database for future follow ups by recording clients’ names. If you do not know who your customers or clients are it makes it difficult to achieve business growth in Perth.

6.     Join business associations and organisations

Business associations and organisations give you access to industry leaders about current innovations and developments within your chosen market for an annual membership fee. They hold regular events, seminars, short courses and networking events which can be incredibly valuable for meeting business owners, identifying investors, and learning more about your industry.

7.     Develop a website

If you’re a well established business, potential customers will be searching for you on the Internet before they pick up the phone or walk through your door. An effective website needs to be functional – communicating what you offer and your point of difference. Ensure your website is optimised for Google search.  This can be daunting but, with some expert help, you will be rewarded with business growth in Perth. It is not the case of ‘build it and they will come’, if your website is not optimised for Google search they cannot find you!

We use a fantastic company called Pineapple Planet to help us with all our online and offline marketing, they have proved invaluable to our business.

8.    Manage your time more effectively

Take note of where your time is going each day. Some tasks could be consolidated or completed at a dedicated time each week. There are free or low cost time management tools available such as Toggl that can monitor your daily workload and can generate weekly reports or Google Drive that can store documents, pictures and designs that you can access from anywhere and share with colleagues all from one point.

9.     Buy good quality business cards and use them

Take any opportunity to hand out your business card when you meet new people – even outside of work. Make sure those business cards and your brand are ‘up to scratch’. If they do not portray your business in a professional way then the business will not be seen as professional. The first impression counts.

10. Generate referrals

There are many ways to create referrals and grow your business. For example, you could pay for referred leads, write a blog, attend trade shows, or simply advertise through various media.

Your small business will need to harness a variety of methods for it to grow sustainably, so take the time to plan ahead and try some new approaches to achieving business growth in Perth.

Good luck and let us know how you get on.

If you need help to improve business growth in Perth, call us today on 9204 3733 or  Contact Us – we will be happy to help.  We can offer our Management Consulting service which assists our clients to achieve business growth in Perth.