|Members: Here at Shirlee’s Gym, we like to share good advice. Many of our members own small businesses. Here is a guest post by Shaila Chamberlain, CPA, CMA, MBA to help you get through the financial aspects of the pandemic. We found it helpful and hope you do as well.
Leaner, Stronger, Better!
These are hard times. We are about one week into the restrictions brought about by the Covid-19 pandemic, and the impact on many businesses has already been devastating. There will be those who don’t make it through and there will be those who come through limping, battered and bruised, but poised to take advantage of new opportunities ahead.
Which will you be?
No matter the circumstances in life, we are always given a choice: fight or give up, stay or go, fish or chicken. Today’s choices: keep on with “business as usual” until you run yourself into the ground, or “think” your way into a successful tomorrow.
Here are some things to think about your own business:
What revenue stream has the highest profit margin?
I walked one of my clients through this exercise recently, and we found that the revenue with the highest profit margin was the one that was most ignored. Almost all his resources were targeted towards lower margin revenue streams. By refocusing efforts on higher quality sales, the company is poised to make more money with less effort.
Which customers are worth keeping?
Everyone has heard of the 80/20 rule: 80% of your profits can be attributed to 20% of your customers. We all have customers that seem to need too much, pay too slowly and haggle over every detail. We think we know who they are, but have you ever taken the time to actually calculate this out? When my clients see these numbers in black and white, they are ready to make tough decisions that instantly improve profitability.
Can I keep my employees?
Modeling is a great way to figure this out. Modeling takes what is known, such as fixed costs or contribution margins, and combines them with interchangeable variables, such as future customer demand, and calculates profitability under different scenarios. Of course, no one can predict the future, but modeling can help you see what your business might look like with 100% employee retention versus 50% employee retention.
Am I an investor or a spender?
Every penny you spend should be weighed against the benefits received. If the benefits do not outweigh the costs, why are you buying?
Choose the Right Accountant
It’s time to stop thinking about your accountant as an expense and start thinking of her as an investment. If your accounting staff or outside firm helps you navigate these troubling times by analyzing your business in some of the ways I mentioned above, I guarantee that they are an investment worth keeping. If they fall short, take advantage of the downtime that you are experiencing today and reach out for more information below. Now is the perfect time to give your business the attention it deserves, so you can come back from the crisis…
Leaner, stronger, better!