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How to manage your cashflow

June 16, 2010 by Brendan Flattery

Brendan Flattery, managing director of Sage’s Small Business Division, answers some key questions about the importance of maintaining healthy cashflow.

What is Cashflow and why is it important to SMEs?

“Any successful small-business owner will tell you that healthy cashflow is critical to the smooth running and growth of their business. It’s been a challenging time for all businesses recently, regardless of size, and one that will have a lasting impact on the way businesses structure and manage their operations. One of the key lessons that many small businesses have taken from the recession is the importance of healthy cashflow.

“Put simply, cashflow is the movement of money within a business, but this seemingly straight forward concept can have detrimental effects if badly managed.”

What are the likely consequences of poor cashflow management?

“Healthy cashflow is vital for all businesses, but the consequences of not managing it effectively can quickly have a massive impact. A small business can only survive for a limited period with a negative cash flow. Ultimately, the business will end up insolvent, which means it will fail because it won’t be able to pay its creditors.”

How can SMEs monitor their cashflow?

“Cashflow forecasting software is an important business tool that can not only show payment patterns and forecast the year ahead, but also highlight re-occurring late payments.

“It’s been widely reported that most failed businesses have closed because of problems caused by inefficient cashflow management rather than anything else. If small businesses put into practice the correct processes they will be able to manage their financial planning effectively, forecast the year ahead and identify any potential cashflow issues early enough. Then they can take action to avoid any anticipated downturns. More effective cashflow management will help stabilise the business, as well as ensure the business emerges from the recession in a stronger position and cash positive.”

How will monitoring and planning cashflow help?

“Julia Boggio Photography is a Sage small business customer. The business has experienced first hand why accurate cashflow forecasting is a must. They used Sage 50 Accounts forecasting tools. MD Julia Boggio says:

‘When I was reviewing our cashflow forecasts in November of last year, I could see there was a dip due in February. We reorganised our finances, cutting down on advertising and came up with an alternative contingency plan, which we put in place. This ensured we were well positioned to account for the dip and even enabled us to have a better February than the previous year.”

What impact do late payments have to a small business?

“More than half of the 2,000 small businesses polled by Sage in our monthly Omnibus survey said they had been impacted by late payments over the past year. The Department for Business, Innovation and Skills reported that more than 4,000 businesses failed in 2008 solely because of late payments.

“It is critical that start-ups and all other businesses to remain aware of exactly how much money they are owed and when payments are due. This helps to prevent late payments in the first instance. However, if they do occur, good management can ensure that they do not have a damaging effect on the business’s overall cashflow. These are all aspects that business accounting software can help you get to grips with.”

What are your top tips for maintaining healthy cashflow?

“Make sure all your employees – if you have any – are kept informed about the state of the business’s cashflow. This will hopefully prevent them from making purchases your business cannot afford. At times you might be waiting for a large invoice to be paid, so you may have to put spending plans on hold.

“Create accurate cashflow forecasts for the year ahead. It will enable you to plan for the future. Forecasts allow you to identify potential cashflow crises, for example, be identifying periods when your costs exceed your revenue. At such times, your business might need to seek financial help. To be fore warned is to be fore armed.”

Brendan Flattery is the Managing Director of the Small Business Division at Sage UK and Ireland

  • Visit the Sage website to download its guide to effective cashflow management.

Mumpreneurs and money

June 16, 2010 by Antonia Chitty

Most mums with businesses are serious and committed, but don’t always find it easy to turn this commitment into big bucks.

Many women need to change the way they think about money and how they feel asking for money. Research has shown that women are less comfortable to ‘name their price’ than men, and women in ‘helping’ professions are less comfortable than, say, women working in IT. Say how much you want for your service out loud: are you comfortable saying this or do you feel a bit apologetic? I know I do.

When I run courses the majority of women attendees are in business to HELP in some way. You can only be truly effective as a helper if your business is strong and making a profit will allow your business to grow and help more people.

If you are in the position of running a business that doesn’t make enough profit you could:

  • Pay close attention to where the money comes from. Which clients/product lines bring in most profit? What can you do to maximise these?
  • Look at your outgoings. Could you source more cheaply, alter suppliers to ones with bigger discounts or buy in bulk?
  • Work out which jobs you should outsource to allow you to work more effectively. Pick tasks that you struggle with which someone else could do more efficiently.
  • Ask clients and customers about the value your business offers. Collect their feedback and spontaneous thanks to help build your confidence in what you offer.
  • Work out what motivates you to earn through the business. Is it the feeling of independence, the need to put food on the table or the ability to pay for treats? Remember this when it is time to chase for payments.

Follow these tips, stay in control of your finances and you will see your business grow.

Antonia Chitty of Family Friendly Working

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How do you get real people to read your blog?

June 15, 2010 by Fiona Humberstone

Have you seen Julie and Julia? It’s a heart-warming (read cheesy rom-com if you’re a cynic) tale of a downtrodden woman in a dead-end depressing job who wants to make something of her life. She’s tired of her over-achieving friends looking down on her career and one day, decides to blog her experience of cooking all 575 Julia Charles recipes.

There’s a classic moment in the film when, on the verge of a nervous breakdown (or meltdown as she calls them) Julie is wondering why on earth she’s bothering, and whether anyone is even reading her. Then she gets her first comment… except it’s from her mother, asking if she’s the only one reading this and when she’s going to give it all up and start behaving like a wife.

Of course it all ends happily ever after. Julie gains an enormous following, she is inundated with calls from book agents, she’s now a writer AND she gets a film deal. Wow! That’s some happy ending.

When you start blogging (and even when you’ve been doing it for a while) it’s easy to worry about who, exactly, is reading you. Is anyone visiting your blog? Do they like what you have to say? Is it adding any value to your business or your life?

I remember talking to Karen Skidmore a few years back. She always used to have such vibrant conversations happening on her blog, and I’d be lucky to get a comment a quarter.

Karen told me that they’d start to happen. And once they started to happen that they’d snowball. And she was right. Although it took a little longer to figure things out than I’d hoped. Comments, retweets and people stopping me at a networking event to say that they love my blog is the ultimate validation for me that the hours I spend blogging are doing something. That I’m not just talking to my mum and dad through this blog, but that there are real people out there enjoying and benefitting from what I have to ramble on about.

And when I get new clients because they’ve been following my blog for a few months and love what we’re doing, that’s great. In fact, it’s more than great, it’s now a core part of my marketing strategy.

But how do you get your blog to a point where you have regular readers, subscribers and your blog has a real presence?

I think there are lots of factors. Design is key, think about blogs like decor8, designsponge or some of the foodie blogs I like to read such as Sweet Paul. The photography and design is utterly gorgeous – people keep coming back for the inspiration and escapism these blogs provide.

Content is king, but there’s more to a blog that people want to read than good content. We’re suffering from information overload. If your blog looks dull, it doesn’t matter what you’re saying, your readers are going to think your blog is dull. And it doesn’t matter how compelling your post, they’re likely to forget you. As people start to comment more you’ll be able to suss out what they want to know about.

When I started blogging I didn’t post much on what we’d been up to in the studio. I thought it would be too boastful, that people wouldn’t want to read about it. But actually, the more ‘In the Studio this Week’ posts I wrote, the more comments I received. Of course, I always make sure I intersperse with some “how tos” as well, or it would just turn into one massive online portfolio.

Your writing style also has an influence. I’ve found that the more I let my emotions loose in a blog, the more comments and dialogue I seem to gain. And uber-bloggers like Holly Becker seem to do the same.

One of the things that’s revolutionised my blog more than anything is my use of Twitter. By feeding my blogs in to Twitter, I’ve been able to “promote” my blog to my followers, who, if they like what I’ve written, have retweeted on to their followers. When I get this right, my hits shoot through the roof and I know I’ve struck a chord.

But how about you? What do you do to promote your blog? How do you engage with your readers?

Fiona Humberstone, Flourish design & marketing

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Employees and business responsibilities

June 14, 2010 by www.inafishbowl.com

In the latest installment of Marcela from Rico Mexican Kitchen's startup story, she employs her first member of staff and decides how best to distribute the everyday responsibilities.

Marcela was advised that her new employee would be extremely important to her business so she wanted to find someone she could trust and who could take on some of the responsibilities to allow her to concentrate on making Rico Mexican Kitchen a success. Having found that employee, can they find the right balance between friendship and work relationship?

With her new employee in place, they created a mind map to help them list all of the jobs that need to be done, who will be responsible for what and how they can support each other.

Do you have any advice for Marcela on her new employee and how having him around may affect her and the business? How can she ensure she is aware of what needs to be done at all times? How much input should she have in the work done by her employee now that they have split their responsibilities?

You can find out more about Marcela on the interactive business website www.inafishbowl.com

Five things start-ups should know

June 10, 2010 by Sally Pritchett

My business, Something Big, works with a large number of start-ups and established businesses. We help them to focus their marketing efforts with the aim of achieving growth. Often, I draw on my own experiences, of course, gained while running our business for ten years. I’m also able to draw upon seeing how other clients get over the hurdles they face. Here are the five key start-up lessons, marketing and otherwise, I’ve learnt.

1 Have a plan

It’s an obvious one and something everyone will advise, however, you’d be surprised at how many businesses have come to me in the past ten years with a list of marketing “ideas” yet no idea of budget or likely return on investment.

Your marketing plan doesn’t need to be ‘War and Peace’, but it should contain: a detailed description of the service/product you’re offering; a profile of your target customers; and a broad set of activities that will enable you to communicate with them.

2 Sweat before you spend

In the early stages it’s easy to get excited and run down to the local agency to brief the designers on your new flashy logo, business cards, website and launch campaign, but before you dash out the door, I urge you to sweat a bit first.

By this I mean make those uncomfortable cold calls; knock on a few doors; trawl the net signing up to every free online directory; make the most of social media and bring in some business before you spend your valuable start-up budget. All of the above will help you decide how to position your business better anyway, as well as pay the designers.

3 Don’t give up your day job too soon

Many people, as I did, leave their jobs in large companies to start new ventures, which is a good plan, but don’t resign too early. In those precious early stages of your business it’s great to know you can still afford to pay the mortgage. You may feel that doing a day job holds you back from getting on with your new business, so make use of your time, whether it’s getting up half an hour earlier to do some online research, making five targeted telephone calls during your lunch hour or banning yourself from TV a few nights a week. If you have the focus and determination, you can do a lot of business planning while holding down your day job.

4 Take good advice and listen to it

This has been one of the keys to unlocking the success of my business. I might be an expert at what I do, but that’s design, marketing and print, not being a financial director, HR manager, landlord, business strategist or any of the other hats I must wear everyday. I take the “ask an expert” option everywhere I can and 99 per cent of the time it gives me an approach I wouldn’t have otherwise taken. Seek advice from people with the necessary knowledge and experience and listen to them carefully.

5 Work “on” the business as well as “in” it

This is one of the golden rules that is usually hardest to achieve. It’s easy to get stuck into the day-to-day of running your business, because that’s what your job is, but in a small business, you’re also responsible for keeping an eye on the future and that means knowing what your competitors are doing, knowing what market trend is about to hit you where it hurts and being at the forefront of your sector, so stick your head out now and again. Good luck.

Sally Pritchett of Something Big

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Has your business got the X Factor?

June 07, 2010 by Chris Barling

In business, as in the popular TV show X Factor, more people fail than succeed. If this can be attributed to luck, some people seem to have more luck than others. So it’s reasonable to ask if there is such a thing as the ‘business X Factor’ or is it all about being in the right place at the right time?

Make your own luck

I guess I should know all about luck. I co-founded ecommerce supplier SellerDeck and we managed to float our company on the London Stock Exchange during the dot com boom, raising £25m and valuing the company at £100m, despite at that point having never made a profit.

Looking back, it is all rather ludicrous, so we were definitively in the right place at the right time. Having said that, we didn’t get there by accident. I had carefully looked at technology trends for several years before starting the company, concluding that the internet in general – and ecommerce in particular – offered a tremendous opportunity. At the time, even Bill Gates wasn’t a believer.

Know where you are going

Simon and Amanda Walker sell specialist pens online. Their original target was people who are interested in unusual pens, so they knew that to interest these people, they would have to provide a massive range. That’s why their website states that they offer the “widest choice of pens on the planet” – more than 6,000 at www.cultpens.co.uk. They understood the customer requirement; they created a plan that would satisfy it; and now they have a highly successful business. Textbook stuff.

Be profitable to survive

There are a variety of reasons for starting a business. Some start because they want to get rich, others want to change the world, but no one wants to fail. Avoiding failure means making a profit. Profit is the oxygen of business. Even if the principle objective isn’t about money, you still must make a profit. There’s no need to worry about the X Factor if you don’t make a profit – you won’t be around long enough to find out whether you’ve got it or not.

Focus on customers

One of my company’s customer’s grew his business from a front room start up to a business with £23m sales. Chatting to founder Steve Hanbury recently, I was reminded of how important his total commitment to customer service and value was to his success. Customers pay the wages; if we forget this we’re in trouble. All successful businesses need to focus on their customers.

Avoid rigidity

The press delight in stories of hapless travellers whose satnavs took them up a track or to an impassable river. The drivers thought that they knew where they were going, but more attention was required. It’s no different in business; when disaster is imminent it’s critical to be flexible and not insist on sticking to the business plan.

The true X Factor

It’s worth asking yourself whether practising the business virtues mentioned above comes naturally. Focusing on customers, setting a plan yet remaining flexible to change and also enjoying yourself while doing it seems a big ask. Are these the key to success?

It’s unfashionable to admit to watching X Factor, but I hold my hand up and say that it’s interesting to note that many of the talented contestants are sometimes hesitant about their capabilities, while those with least talent are often convinced they have great ability. The best are generally humble and are looking to improve. The true X Factor might be a willingness to receive input, take it on board and strive to get better.

Chris Barling is Chairman of ecommerce software supplier SellerDeck

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