Consider these simple business rules to help your business thrive.
First Rule: Make sure customers pay you on time, and that your pricing reflects the true value of what has been received.
It is estimated that 4 out of 5 small businesses are owed money from customers, with approximately £6.9bn being owed within the UK. Ideas to reduce the impact of debt on your business include:
– Consider running credit checks on your clients through third party solutions, you can receive a credit worthiness score to use in your payment discussions.
– Look at your payment terms. With capabilities for instant payment online, there is no reason why you cannot be paid on work completion or even upfront. Avoid agreeing to payment terms of 90 days or more, as over time this may create cash flow problems.
– Make sure the amount you charge for work is the true value of what is being delivered. There are many examples of businesses not increasing their prices even after 3 years or more. Look at building your price through a detailed internal costing, a bottom-up assessment of your pricing and then to add the margin in line with your business plan and budget forecast. When reviewing pricing, it is important to consider price elasticity when testing increases.
Second Rule: Systemize what you do to help drive scale
Building a business requires you to be able to grow your idea and company without solely relying on your own personal time and skills. The way to achieve this is to systemize your business by developing systems and processes that allow anyone to work within them. By your employees following a process, errors can be reduced and consistent standards maintained. Having a clear system can help your business drive scale and efficiency as a result.
The true difference between being self-employed, having a business and being an entrepreneur is whether the business can work without you. For more in depth concepts consider the book ‘The E-Myth revisited’, from business author, Michael E. Gerber.
Third Rule: Allocate time to plan your business
Consider the vision for your business and allocate the time required to plan accordingly to achieve it. Planning is for many business owners “last on the to-do list”, however, neglecting to make time to plan and review your business vision and strategy can be damaging in the medium to long term. Look to monitor business progress made against your targets, and not just on turnover, for example, but more predictive indicators such as lead generation and customer feedback. Benjamin Franklin famously shared, “by failing to prepare, you are preparing to fail”.
With an endless amount of articles and books, readily available, on how to run your business it can be difficult to know where to start, but a step in the right direction is to follow these three simple business rules.