Cash flow and working capital is the life-blood of any business. It’s also the biggest preoccupation or challenge expressed by most business owners. Sound familiar?
All businesses are constrained by time and resources, so it is essential to focus on what and where the greatest value is created. So let’s get focused: exactly where IS the money in your business?
Not All Parts of Your Business Are Created Equal
Many business owners say they have a “gut feel” which parts of their business contribute the most value to the bottom line and where the perceived “drag” is in their business. Looking at the numbers in detail usually offers up a few surprises.
Strategic growth begins with optimizing what you’re already doing before looking outside. It’s all about optimizing your time and resources on the higher-value parts of your business, and either improving, doing less, or eliminating the lower-value parts.
As a quick exercise, try ranking the value contribution of each part of your business segments (product-line, service, territory, end-use – whatever’s pertinent to your business) highest to lowest for:
- Unit Margin;
- Revenue Contribution;
- Cost of Delivery or Unit Cost;
- End-Use , Service Segment, or Geographic Area;
- Client Acquisition Cost, and/or;
Or other measures pertinent to your business.
Focus and act on where your numbers point you. Chances are, you’ll be redirecting some of your time and resources.
Not All Clients Are Created Equal
What do your preferred Clients look like and what attributes are important to your business? Is it based on amount of one time or reoccurring spend, proximity, ability to grow the relationship, dependable payment, latitude to ‘do what’s needed’? Preferred Clients ALWAYS have key attributes. Write them down – you need clear search criteria if you wish to find more.
And incidentally, are there Clients that you DON’T want to do business with? What are THEIR attributes?
Not All Suppliers/Vendors Are Created Equal
What do your preferred Suppliers, Manufacturers, or Service-Providers look like? Is it based on their quality, cost, reputation, unique/exclusive product or service, quick response, technical support, safety, industry certification? Write down their key attributes as well. Is there opportunity to communicate your preferences to your current Suppliers? Now that you have clear preferences are there other suppliers that might do better? Raising the bar makes your business better, and often easier.
Conclusion: You will have “Found the Money” when you…
- Know and track the value-contribution of each defined segment of your business.
- Focus your efforts and resources on the higher-value offerings and/or segments.
- Either improve or drop lower-value activities and redirect those efforts to higher-value.
- Build your Client base (existing & new) based on your ‘Preferred Client’ criteria.
- Challenge existing Suppliers and select new suppliers based on your ‘Preferred Supplier’ criteria.
- Focus on new growth that improves the performance of your business segments and bottom line.
Having difficulty “Finding the Money” for YOUR business? Doug’s Unlimited can help.
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