March 2004
The following article was first published in the Eastern Daily Press' 'The Business' on 2 March 2004
It's a numbers game after all
The sports pages of last Wednesday's EDP carried a detailed analysis of the final 14 games that Norwich City face in their bid for promotion to the Premiership. Each day serious fans peruse the football league tables, checking the number of points each club has amassed in the season to date, and calculating the results required to ensure their team is in with a chance of promotion or can escape relegation. Why then, I wonder, do so many business owners seem to know less about how their company is performing than they do about their favourite football club?
I find all too frequently that owners and managers of small businesses simply don't know the basics about their company's financial performance. A few only really know something about recent turnover - what I call the “corner shopkeeper syndrome” - what were today's takings? Others may have a reasonable idea of what it costs them to run the business, but they don't keep track of this information with the same fervour as they do the income side of the equation, nor with the same regularity.
Most importantly, in terms of financial performance, it is depressingly common for an owner to have very little of idea of the true profitability of the business, even in simple terms. And this knowledge is frequently not available to them until after their external bookkeeper or accountant has completed the books - sometimes at the end of the financial year!
We keep score in games - otherwise, we wouldn't know who was winning and who was losing. Is business so much less important than football that the owner can be content to learn how well or how badly his business has done 12 month's after the match started? I hope not.
I'm not trying to persuade readers to rush off for the first accounting course they can find, but I do believe that understanding the basic numbers is a critical business skill that every business owner should possess and put into practice daily. As a start, you should have a reasonably accurate idea of your income, your outgoings and the gross profit your business is generating, and you should know what these numbers are at least every month, if not more frequently. If you don't, you will find it hard to make rational, informed decisions about what to do next in your business.
Behind these key financial numbers are a few other simple numbers that measure the fundamental “corner stones” of any business, large or small. They, too, need regular recording and analysis, just as turnover, costs and profit do. They are:
The number of leads you generate through your marketing efforts;
The percentage of those leads you convert to business;
The number of times your customers buy from you in a given period and
The average value of each sale you make.
We'll explore some of these in more detail in future columns, as they are one of the secrets to growing a more profitable business. And, like Norwich City fans who want to see the Canaries in the Premiership next season, I hope that business owners reading this want to see their companies succeed, too. If so, make sure you're keeping score.
The following article was first published in the Eastern Daily Press' 'The Business' on 30 March 2004
Back to basics: Generating leads for your business
I've referred in previous articles to the `cornerstones' of a business - measuring the key activities that form the foundation of the enterprise. They are common to any size and type of business, yet I am surprised regularly by the lack of knowledge - and interest - many business owners display about these essential numbers.
The start point of any business - the thing that drives everything else - is lead generation. Put simply, these are the people that are attracted to your business as a result of your marketing efforts.
For those of you who think this smacks somewhat of teaching grandmothers and all that, I apologise. However, I see business owners every day who don't have any idea of how many business leads - potential customers - they have generated over a period of time. Quite a few (but by no means all) of them know how many actual paying customers they had, but not how many got away.
One of the main reasons I ask clients to measure how many leads they know about is so we can assess which marketing methods are working best and which aren't. Don't get frightened by that term `marketing'. All I'm talking about here are the various ways by which you seek to make your business known to those who might buy from you. Sure, there is advertising; everything from a hand-drawn poster on a wall, to the local parish magazine to a full-blown media campaign with press, radio and television. But just think for a moment about all of the other ways by which you could create solid business leads:
Handbills, flyers and brochures - how attractive or impactful are yours?Yellow Pages - people who use the YP already want to buy; they're just looking for the right suppliers. Will your advert attract them?Billboards, general signage, taxis, buses - you see them every day. Think about the ones that catch your eye, and then compare them to yours…Window displays, Point of Sale materials - great displays attract lots of peopleWeb sites - a huge topic in its own right. We'll come back to this another dayEtc, etc, etc. The list goes on and on…There are a lot of other things that should not be ignored when thinking about how to get more potential customers to consider your business:
Public relations - this can be the cheapest and most effective form of `advertising' you'll ever use if it is done wellBuilding alliances with other businesses to whom you can refer business and who, in turn, can lead people to youNetworking: a very powerful way to get your business known in the local communityYour business card: does that little piece of card you hand out to everyone you meet create in the recipient at least some interest in your business? If not, maybe you should think about redesigning it one of these days.And, finally, the most powerful of all - customers who are recommended by other satisfied customers.Once you start learning where your leads have come from - and where they haven't come from - you can concentrate your time, money and effort in the most effective places and either stop wasting them, or put them into improving those activities that aren't generating results. Not difficult, is it? Just basics, really. But, as with so many basic things, easily forgotten.