With the wealth of business advise available, it can seem over-whelming and complex to understand for businesses, here are three simple business rules to get you started:
First Rule: Make sure customers pay you on time and its true value.
It is estimated 4 out of 5 small businesses are owed money from customers, amplified to approximately £6.9bn owed across the UK.
This figure is unbelievable but when you click down into the detail you can see in parts where it can be prevents.
– Consider running credit checks on your clients through several third party solutions can provide a credit worthiness score to use in your discussions.
– Look at your payment terms. With the current capabilities in online payment platforms, there is no reason why payment cannot be paid on work completion, even better upfront, rather than 90 to in some cases 180 days payment terms. Waiting to be paid 90 days or more after work completion has all the hallmarks of cash flow problems.
– Make sure what you charge is a true value of what is being delivered. There are several examples of businesses not increasing their prices even after 3 years or more. Have a detailed internal costing, bottom up assessment of your pricing and then to forecast aligned to your growth target the price increase required.
– Naturally with all services and competitive markets, consider price elasticity
when testing increasing what you charge customers.
Second Rule: Systemise what you do to help drive scale
Building a business is about being able to scale your idea and business without relying on you personally.
The way to do this is to build on systemisation of your business rather than relying on people, such that your business is not a job only for you whereby you are imprisoned within it, drowning in your own sweat equity, but instead to have systems and processes that allow anyone to work in it and thereby driving scale.
The true difference between being self-employed, having a business and being an entrepreneur is whether the business can work without you, per the concepts from business author Michael E. Gerber – The E-Myth revisited
Third Rule: Allocate time to plan your business
Consider what the vision is for your business and allocate the time to plan in line with that vision.
There can be a thought of planning is a “last on the list to do” for many business owners, but without proactively making the time to plan and review business vision and strategy, can be damaging to the medium to long term.
To help plan make sure you have systems in place to monitor progress against targets, not just on turnover etc, but more predictive indicates such as lead generation, customer feedback and more.
“by failing to prepare, you are preparing to fail.”