Never forget the basics - is it time for a business healthcheck?
The recession has made many people in the electrical wholesale industry step back, take stock, examine process and finances, and find better ways to operate. Many wholesalers are looking to reduce their costs and renegotiate existing contracts, but there is also a focus on finding new sources of income by researching and targeting different markets, diversifying, and using e-commerce.
It is particularly important in such times not to forget the business basics, so EWM asked Chris Simpson, a Business Link adviser, for some advice. He said: “It is tempting to feel isolated if your business isn’t doing as well as previous years. However, today more than ever, it is essential to know that you are not alone - Business Link, the government backed information and advice service is on hand to help. Business owners can attend workshops, arrange meetings with their local Business Link advisers or visit the Business Link website - www.businesslink.gov.uk - which is home to a wealth of information - from raising finance, to employing people and improving your sales and marketing.”
Business Link advises wholesales to undertake a few basic, initial steps:
- Carry out a Business Link Health Check to review your current activities. Sometimes an outside perspective can help you ask the right questions and plan a new way forward. (www.businesslink.gov.uk/healthcheck). This healthcheck should consider areas such as customer satisfaction levels; suppliers and their performance; products and services in comparison to other offerings; people and skills base and processes; and procedures and equipment.
- Look after your cash. Make sure that all bills are paid on time, and pay your suppliers and staff on time too. Businesses will reduce their own risks by paying suppliers on time as it helps ensure the whole supply chain stays in the black.
- Understand your finances. What’s your break-even point? How much of a cushion do you have? If sales/contracts don’t make much profit, even a small increase in costs or a tiny drop in turnover could push the business into the red.
- Monitor your cash flow on a daily or weekly basis – you shouldn’t delay until the VAT Returns and annual accounts. Make good use of bookkeeping or accounting software to generate reports that tell you how you are performing now.
- Know your gross margins. Avoid chasing sales with a low profit margin, if the same effort will secure sales with higher profits.
- Be realistic about what you can and can’t change. Prepare an honest forecast of sales, profit and cash flow, and be brutal about what needs to change.
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