How To Fall Back In Love With Your Business
The Entrepreneur’s Guide To Rediscovering Your Mojo And Enjoying Every Day By Living Your Dream
By Adrian Peck
Isn’t running your own company supposed to be fun? How can you fall back in love with your business?
Growing a successful company is not a smooth, straight journey. Many get stuck along the way. Before long, and often without realising it, you, the owner, will start to fall out of love with your business.
How would you know?
You’ve lost the passion and drive you once felt. You’re bored and easily distracted. You fill your weekends with exciting activities to make up for the stressful weekdays.
But there’s something else lurking deep inside…The Fear of Failure.
You’ve built your business this far and, if you try to change it, it could all come tumbling down. Have you got what it takes to take your business any further?
By reading and implementing the principles in this book:
- You’ll realise you’re not alone. Your frustrations, challenges and day to day issues are common traits shared across most growing businesses.
- Your business will be easier and more enjoyable to manage
- You’ll achieve the aspirational results you desire and fall back in love with your business
- You’ll get to live the dream all your hard work deserves
How To Fall Back In Love With Your Business The Entrepreneur’s Guide To Rediscovering Your Mojo And Enjoying Every Day By Living Your Dream Adrian Peck
How To Fall Back In Love With Your Business
The Entrepreneur’s Guide To Rediscovering Your Mojo And Enjoying Every Day By Living Your Dream
First published by PeckUK Limited 2019
Copyright © 2019 by Adrian Peck
All rights reserved. No part of this publication may be
reproduced, stored or transmitted in any form or by any
means, electronic, mechanical, photocopying, recording,
scanning, or otherwise without written permission from the
Adrian Peck asserts the moral right to be identified as the
author of this work.
SECCESS® and Better Never Stops® are registered trademarks of PeckUK Limited
ISBN 978-1-9163094-0-1 (paperback)
ISBN 978-1-9163094-1-8 (ebook)
My Mum & Dad – Who gave me the values and ‘stock’ that I treasure dearly.
My Family & Friends – Life has no meaning without sharing the love of Hannah, Haiden, my family and friends: you inspire me every day.
My Brothers – Roger, Ian and Patrick, you are and will always be my brothers.
My Wife & Best Friend: Suzanne, you are my life. I’m so proud of what we have achieved and excited about what lies ahead.
This book is like no other that I have read in the personal/business improvement field, and I’ve read quite a few in the past three-odd decades. Its scope is enormous; the number and the breadth of subjects covered, and the amount of detail and pragmatic, practical advice given is prodigious.
Aimed at entrepreneurs and business owners with companies whose turnover is around £1m or more, How to Fall Back in Love with your Business is a provocative title that immediately has the reader asking themselves the question of whether they have fallen out of love with their own company.
I decided, after a certain amount of self-reflection, that I hadn’t fallen out of love with my company, Mancroft International, but that there were aspects of the business that I now found tiresome or frustrating, and I used not to feel that way thirty-five years ago when I founded the company.
My personal development programme, the Winning Edge, specialises in how important the appropriate mindset is to being successful in business and in life generally, and this book is an extremely important addition to the genre, as it comes at the subject in a different way and in a way that is pragmatic and completely practical.
There are chapters on Strategy, Empowerment, Control, CASH – an intriguing acronym – Efficiency, Scale, Making it Happen and The Entrepreneurs Guide to Having Fun and Living the Dream; an interesting and eclectic range of subjects and all highly relevant to running a successful company while enjoying the journey.
The most important feeling that you will have if you implement all that is recommended in this book is of control, and there is a direct link between feeling in control and being a better leader, manager, driver, parent, influencer, salesperson – need I go on?
Enjoy this book, it can change your life and have you Falling in Love with your Business again.
Richard Jackson MBE is the Co-founder of The Winning Edge Programmes and Director of Mancroft International. Since 1984, Richard has presented ‘The Winning Edge’ programme to over 175,000 people throughout the World, consistently inspiring his audiences to greater performance and achievement. In the 2014 New Years’ Honours list, Richard was awarded an MBE for services to Development and Corporate Training.
Making It Happen
How To Stay In Love With Your Business…The Entrepreneur’s Guide To Having Fun And Living The Dream 205
About The Author
The Entrepreneur’s Journey
A few years ago you started your business, either on your own or with a business partner or partners. There’s a high chance that you come from a technical background and are good at what you do.
In fact, you’re so good you’ve decided “hell, I can do this, why am I working for this idiot? Why don’t I set up my own company and ‘sail my own boat’?” And you have. You started your own business with great plans and, for a number of years, it has grown well, based on your sheer determination, hard work and passion.
In time you have managed to get it over the £1m turnover ‘mountain’ and you’ve taken on employees. You may not realise it but, even by employing more than three people, you are in the top 20% of UK businesses and, if you have more than nine employees, you are in the top 4%. In fact, if you earn more than £63,000 per year (ONS 2018), you are in the top 3% of earners in the UK, so well done for getting this far.
So what’s next?
And this is where it’s most likely you’ve got stuck. The growth of your business has now slowed down, has plateaued or dropped back. Since you started the business has changed considerably, and you’ve changed with it. I’ve noticed a few significant things happening as people get older:
- You become less tolerant of people and poor service.
- You get more cynical.
- You start to really value your time.
This last one is the most significant when it comes to your business. When you started out you had a dream about how your life was going to pan out, all the things you were going to do. But the greatest challenge to you now is TIME. Where does it go to? You start every week with great gusto, determined you’re going to smash that to-do list; you’re going to get on with doing the things you want and love to do. Monday comes, you drive into work with your master plan and…all manner of shit happens and, before you know it, BAM! It’s Friday again.
Everyone tells you “You should be working on your business and not in it.” Yeah right, how are you going to do that, and who’s going to get done what you normally get done?
As the weeks and months roll by you are more worn down and frustrated. Yes, there are some highs but it’s not what you really want, and you know you can achieve so much more. You start to look overly forward to weekends and holidays and, before long, you’ve become an employee. You have lost sight of the reason you started the business, and in the words of Bob Geldof, you “Don’t like Mondays”. Life is starting to feel a bit like Groundhog Day: every week is filled with unwanted noise and, before you know it, it’s the weekend again. You have started to become bored, easily distracted, disinterested and have lost your mojo.
Managing people is a nightmare. Your business has grown, and so has the number of staff, but the people issues have multiplied well beyond the growth curve. Managing people has become stressful and unrewarding. No-one except you seems to get the business, or seems to care about it, or share the same goals.
Where has all the money gone? Your turnover has grown, you’re employing more people, you have more customers and you’re working harder than ever. But, at the end of each year, the accountant reports lower profits and your earnings don’t increase. You want to start living your life and you deserve more for all the hard work you have put in, and the risks you have taken.
If you haven’t already, or you have, but not quite realised that you have, you will start to fall out of love with your business. You have started to fall out of love with your business. How do you know?
- You’ve lost the passion and drive you once felt.
- You’re bored and easily distracted.
- You’ve stopped thinking about the future.
- You’re difficult to live with, more aggressive, angry or distant.
- You procrastinate more or find it hard to make important decisions.
- You try to fill your weekends with really exciting stuff to make up for the weekdays.
- You blame the industry, the economy, your competitors or anyone else.
- You’re not as proud as you once were about what you’ve achieved.
- You’re frustrated and stressed.
But there’s something else lurking deep inside…
The Fear of Failure
Deep down you believe you know a lot about what you need to do to take your business forward. You’ve also possibly read some books, attended the odd seminar and talked to others about it. So what’s stopping you?
Without knowing it you’ve also developed a fear of failure. You’re worried that you have built your business this far and, if you try to change it, it could all come tumbling down and you will lose everything.
So, the best thing to do is to bury your head in the sand and ‘pretend/hope/kid yourself’ something magical will happen, and it will change.
How can I fall back in love with my business?
You are not alone.
All your feelings, challenges and fears are a normal part of the Entrepreneur’s Journey and shared across most £1m-plus growing businesses. Of course, nobody talks about it. Most of these companies are run by men over 40 years old, and hell, we’re never going to talk about our feelings to each other. If you ask “How’s your business going?” the answer will be “Oh, we’re so busy…” But most aren’t doing that well so don’t be fooled into thinking you’re alone and the only one in the situation.
Your strength now is to recognise the traits and signs mentioned above and do something about it.
That’s why I’ve written this book, to give you a safe place to go and find a proven system to get your love for your business back on track. By reading and implementing the principles that I’m going to share with you in this book, your business will be easier and more enjoyable to manage. Through focus, better utilisation of your team, and by doing the things you enjoy, you’ll achieve the aspirational results you desire and fall back in love with your business. Real results drive wealth and, in turn, you will start to live the dream that your hard work deserves.
It’s time to stop procrastinating. One of my clients, and now a good friend, Adrian Lewis, has a great saying (he’s from Yorkshire so it’s even better in his accent):
“Only shit happens, everything else you have to make happen.”
The Seven Steps to SECCESS®
Through the book, I’m going to show you the seven steps to SECCESS®. Yes I know SECCESS is spelt incorrectly, but that’s for two very good reasons:
- It stands for Strategy, Empowerment, Control, CASH, Efficiency, Separate & Scale. I could have used Unity instead of Empowerment but it just didn’t convey the same importance of a team.
- I’m dyslexic, so it looks perfectly OK to me…
Since 2011 I’ve met and worked with hundreds of entrepreneurs like you, experiencing the same challenges, pains and frustrations. I’ve recognised that it doesn’t matter what industry you’re in, or what type of business you run, you all experience the same challenges. So, I’ve developed this seven-step system that will work for every entrepreneur running a £1m-plus turnover company.
In each chapter I’ll take you through each step and the principle that it’s based on:
Strategy – Enjoy the journey, it’s more important than the destination
Empowerment – You’ll only achieve exceptional results through effective teamwork
Control Panel – Know what you want, measure, assess and drive performance
Cash – Your primary goal must focus on generating real cash
Efficiency – Get more for less through constant review and utilisation of technology
Separate – Stand out by adding value to increase the demand and margins
Scale – Always be selling
With every step there are supporting templates, charts, examples and additional content to be found on our website: www.betterneverstops.global/tools. These are all free to download and use to implement the seven steps into your business.
One last thing, when I talk about products I’m referring to any product or service you sell.
Let’s get started…
“Never take your eyes off the cash flow, it’s the life blood of business.” Sir Richard Branson
“If we keep focused on increasing our sales revenue we’ll make more money…won’t we?”
Without a doubt this is the single biggest reason most entrepreneurs fall out of love with their business. They get sucked into the myth that big is beautiful and that big companies make more money. This couldn’t be any further from the truth. What ends up happening is that business owners work harder and harder, the business works harder and harder, and they increase their revenue. Six to nine months after year-end their accountant tells them their profits aren’t high enough to cover their dividends.
“The harder I work the less money I earn.”
The business owner feels quite dejected after working their butt off the previous year to have less money in their pocket.
But I understand how difficult it is for you to know what good looks like. The vast majority of businesses like yours only have to submit abbreviated accounts to Companies House and this creates an effect of ‘smoke and mirrors’ behind what’s really going on with company finances. Their turnover and profits are hidden and without analysing their balance sheets it’s not easy to see what’s going on in the business. It’s therefore difficult for you to benchmark your business and know if your results are better or worse. And with a bit of ego, bravado and the odd credit card or two, it’s easy for others to appear to be living the dream when you’re not.
This is made worse when companies like ‘Plimsoll’ send you a summary report about how you’re faring in your industry. They’ll tell you the net profits and the average turnover of companies in your sector. But how can they? If they get the information from Companies House these are predominately on abbreviated accounts and therefore you probably need to take these reports with a pinch of salt.
Because of my role with businesses I get to see many actual detailed accounts. At times it can be quite shocking how little some companies, and, in turn, the owners, earn each year. Some business owners would be better off getting a job and working on minimum wage, especially given the stress and hours they work. But they plough on believing it will all come good if they carry on doing what they’ve always done. Come on, that’s not the lifestyle you really wanted when you started on this journey. What’s our number one principle? The journey is more important than the destination.
Where does it go wrong for you?
There’s a high chance that you’re technically very sound at what you do. You’ll have a deep passion for the stuff your business does for your customers. Very rarely will those talents extend to a deep understanding and ability to manage the finances of a £1m-plus company. It’s not your expertise or passion. What you need is the support of a financial director but taking on that cost is not viable.
What can you do?
You need to get focused on the numbers.
Predominantly, profitable businesses fail because they run out of cash. This is notorious in high growth businesses; they grow and grow but lose sight of generating cash.
Remember the urban business saying: “Turnover is vanity, profit is sanity and cash is reality” This isn’t quite true. Why?
Because business owners wrongly believe this means the business bank account and they run the business based on what’s in the bank.
And that brings us on to How To Fall Back In Love With Your Business, principle four:
Your primary goal must focus on generating real cash.
And real cash comes from cashflow.
Your biggest challenge, and the greatest challenge for most businesses, is managing cashflow; struggling month to month balancing the money in and out of their bank account. This is particularly difficult for companies that are achieving high growth. You must invest to grow. The business needs to buy something before they get paid. Invariably you’ll buy materials, parts or labour upfront. If you’re working with corporate customers you might be on 60, 90 or 120 day payment terms. If you’re buying stock, you’re most likely paying for it before you’ve sold it and getting paid by your customers.
Here’s a real life example.
I worked on a business growth project with an engineering business which supplied specialist services to high-end manufacturing plants. I worked with the client to win a £1m-plus contract to fit out a new factory with a six to eight month completion target. At first he was unbelievably excited about how this project was going to enable his business to grow and make him a good margin. “It’s going to enable us to have a smashing year, Adrian.”
That was until I gave him a sense of reality.
During the scoping stage of the project, I looked at how the payment process was going to work, and it worked out you got paid 60 days after sign-off at various phases during construction.
“Paul, how quickly do you think you’ll be able to complete each one of these phases”, I asked.
“Probably every six to eight weeks” came the reply.
“Okay, in that case you’re going to need about £480,000 to fund this project” I stated.
“What do you mean?”
“To run this project you’ll need about £480,000 of cash to fund your work in progress, before you get paid you will need to spend £480,000 to buy materials and pay your guys.”
As you can imagine, the colour drained from his face and his jaw dropped to the floor. After a few expletives aimed at me, he calmed and replied, “Okay, explain how you’ve worked that out.”
I drew Paul a timeline showing the 26 weeks of the £1m project. “Your normal labour to materials rate is about 66% labour and 34% materials. Therefore during the project you’ll burn £25,000 a week in labour. Between each sign-off phase, roughly seven weeks, you’ll spend £175,000 on labour plus the eight weeks you’ll have to wait to get paid, which is another £200,000. In total £375,000 for labour (his guys were paid weekly.). We need to add material costs. This is roughly £13,000 per week. We can probably negotiate 60 day terms, but it will still mean you won’t get paid for around eight weeks after you’ve paid your suppliers. So we need to add £13,000 times 8 = £104,000. In total, you’ll need around £480,000. Yes these figures at your charge out rate, not your cost, but that will give us a bit of ‘fat’ for any slippage in time or costs, or delays in payments. This also needs to be on top of your normal working cash flow.”
“Holy shit” exclaimed Paul.
From this example you can see how easy it is to get into deep financial problems when you win these large projects. It’s no wonder why so many small contractors go bankrupt. It would have been very easy to brush over the financial burden of this project and wonder why the business went bankrupt. The profit margin was good for the project, but as I’ve already stated, it’s not uncommon to find profitable companies going pop.
Fortunately, Paul had a very good relationship with this customer, and his customer really wanted his company to do the job. We prepared a cash flow statement for the project which Paul presented to them. They agreed to pre-pay for materials and shorter four-week project sign-off phases paid within 30 days, so we managed to negotiate the required funding from £480,000 down to around £200,000.
Your primary goal must focus on generating real cash.
To fall back in love with your business you’re going to need to get close to your numbers. The good news is I’ve got a proven approach which will enable you to make and get control of your cash.
There are four critical elements to making cash and I call them CASH:
- C = Costs
- A = Assets
- S = Sales
- H = HMRC
I’ll go through each one of these in turn and give you practical advice and a process for managing them. I’ll try to keep it as simple as possible and I’ll apologise now to any accountants who may disagree with some of my terminologies, but I’m sure they’ll agree with the approach. I’ll also apologise if at times I’m teaching you ‘how to suck eggs’ as I explain some of the accounting terms and principles. In my experience, I’ve found wide differences in accounting knowledge with business owners and I think it’s better to ensure there is the base understanding. You can always speed-read these bits.
If you go to www.betterneverstops.global/tools you’ll find a working template to assist you with this chapter.
We’ll start first with COSTS. Within my model there are two elements to costs:
- Cost of Goods Sold (COGS) or Cost of Sales (COS), they both mean the same thing. These are all costs directly associated with your sales revenue. For example the products or materials you purchase which you resell to your customers.
- Overheads or expenses, again both mean the same thing. These are the costs you incur to run your business but which cannot be directly attributed to a single customer. Costs such as heating, light, marketing, electric, phones etc.
There’s another way of thinking about the difference between the two above.
Cost of Goods Sold – Costs in your business which are directly attributed to each customer invoice. These costs would rise and fall with each customer transaction.
Overheads – each month, expenses your business incur even if it didn’t raise a single customer invoice. These costs are in your business whether you have customers or not. These are sometimes referred to as your fixed costs.
The only exception to the above is employment costs. These should ideally be split out to show:
- Labour costs that are directly attributed to Cost of Goods Sold, for example, your factory workers or installers or engineers. Their time and costs can easily be attributed to a single sales invoice.
- Office or administration or directors should be shown under Overheads. These employment costs are absorbed into running the business.
But in my experience these are rarely shown this way, most accounts present all employment costs under Overheads. This has the effect of distorting your Gross Profit result:
Sales Revenue minus COGS (parts, materials, shipping, commissions) = Gross Profit.
This isn’t a disaster but as your business grows you’ll want to see your overheads remain relatively fixed as sales revenue increases, and thus you make more overall or net profit:
Sales Revenue minus COGS minus Overheads = Net Profit.
This becomes difficult to see if your direct labour costs are lumped into your overheads.
Our first action under Costs is to focus in on your Overhead costs. This is where you’ll get more ‘bangs for your bucks.’ Some business owners focus on generating more revenue or increasing profits and ignore overhead costs. Here’s a very good reason why we start with managing overhead cost.
If you make 50% gross profit per sale, £1 saved on overheads is worth a £2 increase in sales revenue. If you make 33% gross profit, £1 saved is worth £3 in sales revenue.
Let me explain how this works:
Let’s say you saved £50,000 in overhead costs and you make 50% gross profit; one, that’s an instant £50,000 of net profit you’ll make and two, you would need an extra £100,000 in revenue to get the same result by increasing sales.
If you make 33% gross profit it’s worth an extra £150,000 increase in sales. Overnight I’m not sure there’s many businesses that can make that change to their sales revenues.
When was the last time you or someone in your team went through all your overhead expenses line by line? If you don’t already, you need to create an annual budget to manage and track these costs on a monthly basis. Again you’ll find a template in our tools sections on our website; www.BetterNeverStops.Global/Tools and look for CASH Review.
Step 1: Get a live expense report from your accounts system. This should be a list of all your costs for the last twelve months.
Step 2: Go to the Overhead Budget Tab in the CASH Review Template
Step 3: For each cost item in your accounts report enter the item name and the current annual cost. The sheet will automatically divide and put this into a monthly cost. Once all the costs are itemised here’s your challenge: in the row ‘Totals’ you’ll see your annual overhead costs. How much can you save? Set yourself a goal.
Step 4: Work with your team to find ways to reduce each overhead cost and under the ‘Reviewed’ column mark as:
Same – it will stay the same over the next year
Lower – you’ve managed to reduce the cost for the year
Higher – during the year you’re going to see an increase
Step 5: Put the revised cost into column ‘New Year Cost’, again this will automatically be broken into a monthly cost.
Step 6: This information is now saved in the Monthly Budget sheet and each month you can review your overhead costs against your budget. Here you’ll be able to track variances from the budget and investigate why.
Increasing Gross Profit
The next step under COSTS is to look at your Cost of Goods Sold. In the same way you reviewed your Overheads, you need to look at the costs you incur while making or delivering your services for your customers. When was the last time you negotiated terms with your suppliers? This will vary greatly from industry to industry but within our CASH Review template you’ll see a tracker to manage COGS. Here’s a few things you need to think about in this section:
- Speak to your main suppliers about creating stronger partnerships.
- Negotiate with them to improve terms for price and payments. If you pay faster will they give you extra discounts? If you can’t reduce prices, can you get other benefits, like free or reduced-rate shipping?
- By working together are there ways you can take cost and time out of the process?
- If you know your expected volumes over a period of time, can you bulk purchase products to reduce cost?
- Are there opportunities to improve products or services offered to create lower cost and premium products?
- If the service you receive from the supplier is not the best, can you work together to improve it, or find another supplier?
- Review your production process. Could you use less expensive materials without reducing the quality of your overall product?
- Can you reduce waste in your manufacturing and in the supply process?
- Can you join forces with others in your industry or your customers, to form buying groups to reduce costs?
Using the template update the budget to track and manage Gross Profit.
We now move onto your Assets and under this section there are four key areas we’re going to look at:
- Work In Progress
- Creditors – people you owe money to
- Debtors – people who owe you money
These four items sit on your balance sheet and from my experience these are seldom looked at by business owners. If you keep on top of these through good housekeeping, there’s some ‘real gold hidden in here’ in terms of unrequired stress and extra cash.
1. Stock – when was the last time you reviewed your stock levels?
- Are you carrying redundant stock? Have a full stock review to find old stock items or very slow movers. These items have been paid for and by selling these off you’ll generate cash into your bank. It may be you’ll need to just dispose of non-sellable items or receive scrap money for them. If nothing else just think of the space you’ll create.
- Are you carrying too much stock and in turn have cash tied up in your stock? Another way to improve your cash flow is to carry less stock. There is sometimes a careful balance between getting good terms with your suppliers and buying in bulk. But commit to reviewing how quickly you turn over your stock. Toyota famously uses the ‘Just In Time’ principle (JIT), this is where suppliers ship small batches of products just as they need them thus reducing stock and increasing cash flow. How could you use this in your business?
2. Work In Progress – this refers to the time it takes you to turn sales orders into sales invoices, which ties cash up in the form of stock and labour because you’ll most likely pay for these before getting paid. This is only really applicable to companies whose Sales Order to Sales Invoice time is over 30 days. We’ll cover this in more depth in the next chapter, Efficiency, when we look at reducing process complexity and increasing speed. Here we’ll just focus on the need to speed up the Work In Progress time to get you paid faster.
When working with an Electrical Contracting company, I sat with the owner and the accounts team reviewing their CASH. We discovered they only invoiced every couple of weeks, and worst still, if someone was on holiday it could go down to once a month. When I asked the accounts team why they invoiced this way, they replied “Because we’ve always done it this way.”
Not surprisingly this was easy to resolve and we very quickly fixed it. But my message here for you is: don’t be afraid to ask the simple questions, assume nothing.
What stops you getting paid when you take a sales order?
Are there simple ways you can increase the speed of delivery to get products invoiced quickly? Who’s responsible for invoicing and are they getting orders invoiced without delay?
Could you take deposits or staged payments? A similar approach is to reduce the size of projects or break them into smaller steps.
3. Creditors – these are your suppliers to whom you owe money. Hard nosed finance managers would have you pushing terms as far as possible. Aggressive large corporate companies force their suppliers to accept 120 day or more payment terms. But given half a chance, their suppliers would stop working with them. In small business land, I’m a firm believer in working in partnership with suppliers for the good of everyone, a “do as you would be done by” approach.
Decrease the number of key suppliers so you can work closer with them. Have review meetings with them to discuss:
- Improving discounts and payment terms
- Reviewing working process to reduce complexity and waste
- Investigating ways to reduce material storage and transportation costs
- Looking at opportunities to share product development and improvements
- Can you combine forces to increase buying power?
4. Debtors – these are the customers who you provide credit to. This is often a difficult or sensitive subject as most businesses I work with are in very competitive environments. There’s often a feeling that you must be super cautious around customers when discussing getting paid. “We’ll just use someone else” is a classic bully tactic used by customers. But don’t get sucked into this trap.
Customers who don’t pay you are poor customers, period.
If customers want extended payment terms build it into the price, but they want ‘cheap’, you should also get quick. It’s not until you sit and analyse customers that you realise the time taken in administration can far outweigh the profit you make on that customer.
Using your accounting software and by working with your accounts/admin team, put together a list of customers and their average payment times.
Who is always a difficult payer?
- Try to have a meeting with them to discuss how you can work together to improve processes, reduce costs and resolve issues with payments
- For notorious poor payers increase their prices to balance the time and extra resource it takes to get paid. They’ll either pay it or go somewhere else, both results are good.
- Put all customers onto direct debit payments. If they have payment terms, i.e. 30 days from the invoice date, the money is directly debited from their accounts in 30 days. In effect, this saves them time in scheduling payments via their banks. This sounds slightly scary at first but it’s standard practice with many large companies like utilities and mobile phones. Many direct debit providers like GoCardless and EasyCollect handle the compliance and process relativity cheaply and hassle-free. If a customer doesn’t want to go on Direct Debit they are basically saying “we don’t want to pay you on time”, so reduce their terms. Remember, customers who don’t pay you are poor customers and you don’t want them.
Let’s look now at our fourth CASH step, Sales. There are four (and only four) elements that drive sales:
- The number of Leads, that is, the volume and quality of people who raise their hand to say “I’m interested in buying your product”.
- Sales Conversion, the number of Leads you turn into orders.
- The Sales Order value, the price you charge and any add-ons you generate.
- Repeat sales, the number of times you sell to that customer.
We’ll cover the strategies for these in much more depth in our chapter Scale, but they fit here because they’ll be some simple and quick wins which can have an immediate effect on CASH in your business.
These Sales steps will be really powerful if you implement more than one because they have a multiplying effect on your revenue. Let me explain:
|Current||Increase each element by 10%|
|Sales Conversion||@ 50%||50||@ 55%||60|
|Order Value||@ £1,000||£50,000||@ £1,100||£66,550|
|Repeat Orders||@ 10||£500,000||@ 11||£732.050|
Increase = £248,600. The increase isn’t 10%, it’s a 45% increase.
Yes this example is simplistic and you may feel it’s unrealistic but I can assure you it works. I’ve used and implemented these principles in many businesses and, when brought together, the results each time have been outstanding. You can see how if you make little tweaks in your sales they multiply the outcome through the process. It might be you can’t get 10% on each element, you might be able to increase leads by 5% and something else by 7% but the multiply effect still happens, just at a different rate.
How can you increase each element?
Talk to you team about your current marketing efforts:
- How many leads is the business currently generating per day/week/month?
- How are the leads currently coming into your business?
- Which lead generation strategies are having the best results?
- Can you increase the amount of activity or spend in this area to generate more?
- Is the quality of the leads good, i.e. are these the right target market for you?
- If not, why not and how can you ‘fish’ in the right pond to attract the right leads?
How do you measure sales conversion?
Let’s get something cleared up as this tends to tie many businesses up in knots.
There are many ways to calculate sales conversion rates. Here is the simplest, most effective and accurate.
- Agree with your sales team how long the typical sales process is, i.e. from when a customer first makes contact to when they buy. This is important as I’ve seen Leads carried over for months and months without being closed off. These are never going to convert so they should be closed as lost and not left as ‘pending’ or ‘open’.
- Leads should only have three categorises; New, Won and Lost.
- When a Lead is Won or Lost you mark it appropriately recording the date and if Lost, the reason why.
- When a Lead reaches the end of the agreed sales process time period they are closed as Lost, the closed date and the reason recorded against them.
- Each month you measure the number of Leads Won & Lost based on the date the Lead was closed (Won or Lost); divide the number of Won against the Total Leads Won and Lost for the closed Leads that month and here’s your conversion rate. Won 10, Lost 5, Total = 15, 10 divided by 15 (x100) = 66.7%
If your typical sales process takes more than one month, you’ll have a rolling conversion rate. This might take a bit of a hit as you close old Leads but it will soon resemble something more accurate.
Don’t get bamboozled into:
- Worrying about when the Lead was generated, with a constant flow of Leads it actually doesn’t matter.
- Having a ‘pending’ status. The sales period is the sales period and it’s either Won or Lost. For any Lost that later convert (which are normally quite rare) reopen the Lead and change the outcome and date.
Trust this approach, I have implemented this across many clients and it is the only way to remove ‘sales wish lists’; these are lists of Leads hoarded in a false belief that at some point they will convert. They don’t, so get focused on true sales conversion.
We’ve got that tidied up and you’ve now got a reasonable handle on your sales conversion rate.
- What are the reasons why these Leads don’t convert?
- Hand on heart, are your leads followed up in a timely and systemised way?
- If not, when did you last review the sales process to increase the quality and frequency of sales follow-ups? The fortune is in the follow-up. Many companies stop following up way too quickly because we’re too nice. “We don’t want to be a pain”. Here’s a simple trick: get permission to recontact at each contact stage process stage by asking the Lead “When would be a good time to contact you again?” When you recontact you can begin with “Hi John, I’m just calling you as promised three days ago…”
- Are you using good quality sales materials within your sales process, i.e. do you have a nice brochure or quote pack which presents your products and services and explains the benefits of what you do?
When was the last time you reviewed your prices?
Over the last few years your costs will have risen quite considerably and without realising it this will have had a dramatic effect on profits. Now I know what you’re thinking, the very thought of increasing your prices is making your toes curl: “my customers will never agree to that.” There are four certainties in life: death, taxes, change and customers moaning about prices. We conduct numerous customer research and satisfaction surveys, customers will score you 10 out of 10 for services, quality of product etc etc, but when asked what you could improve, most reply price. Don’t be put off by this. In my experience most don’t even notice a 10-15% rise. In most cases you haven’t even got to tell them unless you’re on agreed price lists or contract. In some industries they have an ongoing annual, six monthly or quarterly price increase.
Enforce your terms of trade.
I’ve come across many clients who have trading terms but don’t enforce them, i.e. “the price is based on a minimum order quantity of 500, if an order is less we reserve the right to increase unit cost to x”. Many are reluctant to use it but when they have customers haven’t stopped using them. In some cases they’ve increased the quantities of orders, “Oh, I didn’t realise, can we increase order to x.”
Speak to your team about how you could add more value to your products without adding more cost.
- Ask your customers “how else could we help you today?”
- What other products could you add to an order to enhance the sale?
- How many times do your current customers come back to you?
- What types of customers are most likely to come back over a period?
- Within your lead generation how can you increase the number of these types of customers?
- Are there any ways you could increase the frequency of purchase, by adding other products or by adding a loyalty scheme?
Our last CASH step is HMRC, yes, our friends at HM Revenue and Customs. There are five key elements to this step:
- Corporation Tax, making sure the business is claiming all the allowances it’s entitled to.
- VAT, keeping good records and putting aside money each month to pay the VAT liability.
- PAYE, making sure you’re claiming all the benefit in kind allowances.
- Personal Tax, making sure your relationship with the business is tax efficient.
- Grants, central and local government schemes to help growing businesses.
We’ll go through each one of these in turn, but I want to make it clear that I’m not a tax expert. Any ‘tax benefits’ I suggest below need to be discussed with your accountant because they aren’t necessarily right for all business owners and allowances and benefits can change. The items I’m going to discuss below need to act like a discussion list for you.
If you make a profit you’re going to pay tax, remember the four certainties in life; Death, Tax, Change and Prices. I’m afraid it’s going to happen. But remember my job here is to enable you to fall back in love with your business. Two of your major frustrations will involve managing cash flow and how much you earn, both of which we’re going to tackle here.
There are two key elements to managing your Corporation Tax:
- Allowances – Making sure the business is claiming all the allowances it’s entitled to.
- Liability – Putting aside monies to pay your corporation tax liability so that when needed it’s already in a bank account.
At the time of writing UK corporation tax is set at 19%, therefore you’ll pay 19% of your net profits to HMRC (for every £100 of net profit you’ll pay £19). But there are legal and approved schemes to lower your profits and therefore reduce your corporation tax payment. Rarely do I find companies making best use of these schemes which can be significantly advantageous.
2. Research and Development Tax Credits (R&D Tax Credits)
If your company invests time, resource and expenses to improving systems, working methods or the development of products/services, you can claim these development costs at an enhanced rate, currently 230%. In very simple terms this is how it works, but you’ll need to work with a R&D Tax specialist to implement.
- You get your R&D project approved by HMRC.
- You track your time and expenses spent on the project(s).
- At year end, all these are totalled up and deducted from your net profits @ 230%. i.e. if you’ve spent £10,000 on R&D approved projects, you can reduce your corporation tax liability by a further £13,000 (£10,000 will have already been in your costs).
- As I understand it, R&D can be claimed back for up to 3 years and can also be rolled forward towards future profits.
3. Relevant Life Insurance
Do you pay for your life insurance personally, i.e. out of your own bank account?
If yes, you need to consider a Relevant Life Insurance policy. The cover and cost work pretty much the same as your current personal life policy. The difference is that the company pays for the cover rather than you. In effect when you pay your life insurance, you’ve already paid tax and National Insurance on the money. With Relevant Life, it’s a cost to the business and therefore reduces the net profit. And here’s the great news, there’s no Benefit-In-Kind to you, i.e. you don’t pay tax or National Insurance as a taxable benefit. Another nice part to it, this can be extended to other key members of your team or even the whole team. I’ve got clients who have rolled this out to everyone within a pay rise or as a bonus. You’ll need to speak to your Financial Adviser or search ‘Relevant Life’ for more information.
4. Company Pension Schemes For Directors
As a company director you can extract profits from your business into tax efficient pension schemes. These are a great way to reduce company profits as pension payments are a cost to the business and if they are paid right, can qualify for personal income tax relief.
There are also certain pension schemes that allow you to use part of your funds to invest in company assets via loans.
Again, this is not my field of expertise, but I want to get this on your radar and for you to seek specialist advice from a Financial Advisor.
5. Liability – Putting aside monies to pay your corporation tax liability.
If you’re making a profit you’re going to pay tax. As your business grows these payments and liabilities have a habit of creeping up on you. They create a heap of added, unwanted stress and pressure on you, and your cashflow. Most businesses leave paying the corporation tax to as late as possible to avoid the fine.
Without trying to sound like your mum, you knew about this liability long before it was due, so it is avoidable.
Here’s what I advise all my clients to do and it’s pretty simple:
- At the beginning of each year work out how much you’re likely to pay in Corporation Tax. You could just use the previous year to start with. Or you can work with your accountant to fine tune it. Put this into your monthly cashflow budget (we’ll be going through an example at the end of this chapter).
- Each month either put the money aside into a separate business account or pay to HMRC. Any prepayments you make, the HMRC will pay you interest on. The intention is that by the time you need to pay your Corporation Tax bill, you’ve got all or most of the funds in a separate account or already deposited with the HMRC. Work on a plan so that each month you’ll know roughly how much it’s likely to be and take the amount from your day-to-day bank account. It’s very likely with the HMRC’s Making Tax Digital programme that the timeframes and the process for paying Corporation Tax will change significantly and the money will be directly taken from your account in the same way as VAT.
Which brings us nicely onto VAT. This step is very simple:
- Make sure you keep good records and they are up to date.
- At the end of each month, work out your VAT in and VAT out, the difference between the two becomes your VAT liability. All accounting software will allow you to run a report to show this. Move this amount to another account ready for when your payment is due. No nasty surprises or scabbing around trying to balance your cashflow.
Like corporation tax there are various allowances you can claim for staff without paying Benefit-In-Kind. Again these change from time to time but currently here’s some ideas:
- Salary sacrifice schemes
- Cycle to work scheme
- Child care
- Work wear
- Employee suggestion schemes
- Tax free loans
- Functions & parties – £150 per head
- Professional Membership Fees
Your Personal Tax
Although the UK Government seems to be hell bent on removing benefits for business owners, there are still ways to minimise your tax and National Insurance payments. The most beneficial structure still appears to be a company director taking a small salary and dividends. You can claim the same benefits as above and there also other tax efficient allowances you can claim:
- £300 per year in ‘Trival’ Benefits
- School Fees
- Home Office
- Business Mileage
All of the above are just suggestions of benefits you may get, for up to date information speak to your accountant and/or a tax advisor.
The final part under HMRC is Grants. This could be a chapter in its own right, but the challenge is that as fast as I could write it, it would be out of date.
But what I do is share my experience of using Grants in your business and some hows to get started.
First of all, why would you want them?
How would you like some free money? “But it’s never free, Adrian.” In this case it is. The Government has a policy to re-invest in the UK economy. In a very simplistic way, if it helps businesses to grow, develop new products and create wealth and employment; it creates more HMRC income via taxes and increases Gross Domestic Product, hence the Government’s motivation.
There are many grant schemes mostly delivered at regional or county level. I’ve seen grants as high as 50% but typically, they are normally around 20-25%. And typically they are capped at £25k, £100k or £500k in terms of full project cost. One of my clients had a significant extension to his building and claimed back around £30,000.
What’s The Catch?
There isn’t one really. Obviously you have to spend the money, and whatever you do, don’t spend anything until it’s approved. Some are only provided on a ‘new employee’ per grant amount basis. There are some caveats and restrictions but the principle is the same and worth investigating to help your business expansion.
My only words of warning…
Some of the grant applications can be time consuming. From experience, if your grant isn’t for more than £5,000, sometimes the time you’ll invest in the application process will outweigh any benefit. Also, the speed in which the grants can be awarded aren’t always fast enough.
To find out more about grants in your area search for ‘business grants in <your county>’. This should find your Local Enterprise Partnership (LEP) provider. They are normally helpful and will provide free telephone or face-to-face grant advice.
In this chapter we’ve focused on how you can fall back in love with your business by getting close to your numbers. This is based on our fourth principle;
Your primary goal must focus on generating real cash.
Real cash comes from cashflow and through the chapter I’ve detailed my CASH model I use with my clients. By using this model and the tools you can significantly improve the cash position of your business by:
- Getting better control of your COSTS
- Using your ASSETS smarter
- Finding quick wins to generate more SALES
- Working within the rules of HMRC to claim and manage tax liabilities
Your action now is to apply this model to your business using the knowledge above and the tools provided on our website, www.betterneverstops.global/tools.
Trust me, if you focus on the above and manage your cashflow, you will significantly reduce the monthly ‘have we got enough money in the bank’ stress. The business will be easier to run and you’ll increase your personal wealth.
But, it will take time and patience to slowly build your reserves and put your business into a strong cash position.
If you need any further help, work with your accountant to get the support you need and build a close relationship with them. Good accountants love getting into this level of detail, it’s what they thrive on and how they add proper value. My own accountant, Jason, is a great guy and I’ve referred him into many of my clients because he loves this type of work.
If this is not your accountant, or you feel you couldn’t have this type of relationship with them, don’t be afraid to change accountants, maybe you’ve outgrown them. There’s not a shortage of good accountants and a change will do you good.
Also you need to find yourself a good, trusted Financial Advisor. The good ones are worth their salt, and working with your accountant will show you a proven path to working your profits tax efficiently and to build your wealth.
What is this book about?
This book is about SECCESS®, a proven seven-step business system that will work for any entrepreneurial business owner who runs, or wants to run, a £1m plus turnover company.
Why did I write it?
I wrote this book because I have a passion for fixing things and helping people. As a business coach and consultant, I am frustrated by the limited number of business owners I can reach. But as an author, I can reach thousands of people and therefore have a much greater impact and inspire more business owners to be successful.
What is different about this book?
The book is different because it’s based on real life. Since 2011 I’ve predominately worked with business owners running half million to seven million pound turnover companies. These are all kinds of businesses, operating in many different sectors. This book is based on the proven tools, techniques and approaches I’ve used to enable these businesses to grow and prosper. Therefore I know everything I discuss in the book can be readily and cost-effectively implemented in any business of any size or shape.
What is the main message?
The first is, you are not alone. The challenges, frustrations and stress you feel are experienced across all businesses at some point through their journey. Indeed, the entrepreneur’s journey it’s not a straight road. It’s got many twists, turns, hills and valleys along the way.
The second, is that entrepreneurship and business growth is a science and not an art. There is a predictable path and known formulas you can follow.
The third main message is there are many ways to grow a successful and rewarding business. The most difficult and tortuous is to try to work it out for yourself. In this book, I will show you a known path, which in parts isn’t necessarily original or ground breaking, but will save you all the time, hassle and pain of trying to find out for yourself.
What problems will it solve?
What I found from the companies that I’ve met and worked with since 2011 is that they follow a very similar path. They started their business based on technical expertise and passion for what they deliver to a customer. Inevitably, they are very very good at it and go on to create a sizable company that is turning over more than a million pounds.
It’s then when the problems come, the various barriers to growth start to block their way and they can’t get it past them. So the business grows to a point, it will slow, plateau or even worse fall backwards.
What I found is there are five key barriers that will hold back the business owner:
ONE is the business owner gets very frustrated, stressed and demotivated by the lack of time that he or she can dedicate to working on the business. They get sucked into delivering the day to day and never time to do what they love doing.
The SECOND is business owners get overwhelmed by the enormity of the task they need to do to actually run the business well. And it is everything from managing people, to health and safety, to sorting out insurances, dealing with the accounts, working with suppliers, managing customers and developing products. It’s quite enormous the amount of stuff the business owner has to do.
The THIRD is life. When they started the business they believed it would give them freedom and time to enjoy life. But actually what they find is, as the business grows they end up working longer and longer hours. They have to work harder and harder on their business just to keep on top of everything. Their life is the business.
That brings us onto our FORTH barrier, money. As the business grows they end up earning less money, especially considering the hours they work. Because of the complexity of the bigger business, the financial aspects are a look more complicated and difficult to manage well. Therefore cash flow and profitability are a constant battle.
And our FIFTH barrier is business acumen. The business owner is very competent at delivering what it is they do for their customer. They’ve got years of expertise and experience of that. But unless they have invested in learning about running a large business, they probably haven’t got the technical expertise required to run a £1m plus business. They’re not simple things to run.
After a few gruelling years of trying to overcome these barriers, it’s then inevitable for the business owner to lose sight of what they are trying to achieve. Without help they will lose their passion, drive and enthusiasm and start to fall out of love for their business. And then the fear of failure will kick-in. They fear that by trying something different, it could all come tumbling down. So it’s safer to do nothing.
In this book I take then through my SECCESS® model which has been purposely developed to overcome all of the barriers described above. It will enable any business owner to rekindle their passion, enthusiasm and drive and soon be falling back in love with their business.
How long did it take?
I started the book in June 2019 and finished the first draft by the beginning of August that year. I pretty much spent around 12/15 hours writing every week. I’m dyslexic so I’m not the fastest of writers and it’s not something that comes that easy to me. However, I have a really great book writing coach, Lucy, and her structure, process and support were just fantastic. I wouldn’t have been able to get it done without her.
Where can they buy it
It’s available on Amazon in Kindle and Softback versions.