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Many businesses, both large and small, hit tough times and often don't survive. If you are experiencing tough times, this article examines methods of (1) Rapidly stabilising your business and then (2) Turning around, a business that is experiencing a tough patch.  It is designed to carry out within a 30 day period of intense activity. The turnaround will happen as quickly as possible. Double Profit in 30 Days (DP30) is one of Profit Savvy's 3 profit boosting strategy plans. (yellow belt)

Project Goals

Goal:

  • Achieve a rapid turnaround of a difficult financial state in your business.
  • By choosing the suggestions that are most suited to your business and then
  • Move quickly - speed is of the essence to prevent further decline in the business.

The 30 day period will empower your team with the idea that rapid activity and rapid results are possible.
A team can work more actively than normal in a "sprint" for 30 days if they know that there is a goal/target/destination at the end of that 30 days.

In this case, it is survival.

How to proceed

Read through this article to become familiar with the content in general terms. Jot down ideas on where to dive in and get started as you read. 

We reference other Profit Savvy  articles, which gives you a chance to read more extensively.

For Example:

  • The 80/20 Rule (see Amazing 80/20 Rule) says only a few things are important and you should focus on them.
  • You can not improve your business until you find and improve the single major problem you face.  Fixing minor issues and overlooking the major one means you will be slow to improve. The Theory of Constraints will give you this knowledge (see Theory of Constraints).
  • Using 80/20 and Theory of Constraints will speed up your turnaround enormously.

Then read and reread the following advice and pick the areas you think are most in need of improvement.

Quick Diagnosis

Determine in as short time as possible what has caused the downturn in your business. You want to at least slow down or stop the root cause. Then remove it or turn it around.

You may have the luxury of knowing what your major problems are already. Example: A new competitor has opened up nearby and is drowning your market.

It is quite common to find financial stress has crept up over time. You may not have given much thought to what has caused the problem. Use Profit Savvy's problem solving tool: 5 Whys Problem Solving Tool.
This tool rapidly identifies possible causes of a problem. You can then work on those causes.

 You may be in the fortunate position of having good historical records. Compare periods when you were more successful with the current to search for reasons for the change. Example: The annual accounts prepared by an Accountant for taxation purposes. Identify where the most significant changes have happened. Ask yourself: "how did these changes happened without me noticing them?" Resolve to increase the frequency at which you study these records (say quarterly rather than annually). You will come across the strengths and weaknesses of your business more rapidly.

Five Focus Areas

In DP30 there are 5 areas within your business on which we can focus attention.

Your options are to:

  • Focus attention on all areas but your progress will likely be slow as you spend time on unimportant things to the detriment of the important
  • Choose to focus on the ones that seem to be the reason why you are experiencing problems.
  • Focus on the ones which are the easiest to turnaround.
  • Remember, speed is your goal here. Focus on things that you can in a short time frame. Come back and revisit any that remain.

The 5 focus areas are:

  • Increase your Income (Revenue).
  • Decrease your Cost of Goods Sold (COGS). Also called Variable Costs. Note: Income – COGS = Gross Profit
  • Decrease your Fixed Costs (Overheads). Note: COGS – Fixed Costs = Net Profit
  • Improve your Cashflow
  • Assemble any necessary business Metrics.

Increase Income

There is often ability to get short term increases in your Income that might help to stabilise your business.
Many of them may seem a bit drastic. You may be surrendering some of your "sacred cows". If you are focused on survival and a quick turnaround, some of those "sacred cows" may have to go.

Following is a list of opportunities for quickly raising Income.

Reasons for Change

If you have decent historical records, it will be worthwhile having a look at them.

Look to see if Income (Revenue) has gone up or fallen.

Gone up:
Not necessarily reassuring - your costs may have gone up even more leading to a fall in profit.
Profit=Income-Expenses

Gone down:
Spend some time thinking about why that has happened.
There might be quick changes you can make to plug any holes you find and get Income going again.
The 5 Why’s Problem Solving Technique can help with puzzling out why change has happened.

Sell or Rent Out Surplus Capacity

In your business, you may have accumulated surplus production capacity over time. Excess capacity is sitting there doing little towards improving your business. Very often it has associated costs so it is a drain on your Profit.

Surplus Space

Example:
  1. You rent space and don't use all that space. The surplus capacity is costing you some proportion of your rent.
Exit from that space - by selling it or cancelling the rent.
This will have the benefit of permanently removing the problem.

  2. You have surplus space within your larger operation.
Think about how you might sub-let that space; providing it is legal for you to do so.
There are many Start-up Businesses that need space quickly and at a low cost. By renting space to them on a week to week or month to month basis, it gives them an opportunity to get started.
It immediately makes that surplus space capacity work for you.

Look at possible issues associated with security, safety and a natural harmony between the businesses sub-letting the space and your own.
This may be personnel, sympathetic industries and no inappropriate by-products like noise and other pollution.

Surplus Facilities

Many businesses may have surplus capacity in their manufacturing and other production facilities.
It is very common for some machines not to be fully utilised.  Your business will typically only have one bottleneck that is 100% utilised.
Some of your other production facilities are necessary but are not fully utilised. That would lead to over production at their particular stage in the manufacturing cycle.
You can read more on this in the Theory of Constraints.

Options:

  • Sub-let some of this surplus capacity.
  • Allow another party to use the resource.
  • Do the work for them under an outsourcing arrangement.

This earns Income from a facility that is otherwise not fully utilised.

Maintenance of the machine, and/or lease payments on it, are Fixed Costs to you.
The more output you can get from them by meeting your own and other people's demands, the further those Overhead Costs are spread.

Surplus Labour Resources

Due to a downturn in your business, you may have surplus staff resources and possibly even yourself.

  • Rent the surplus out, on a short-term basis, to other businesses which could take advantage of their skills.
    You have developed a skilled and successful work team over time that you don't want to downsize by letting some of them go.
  • Look at replacing contractors or outsourced labour working with you by your permanent employees. 
    This cost saving may be necessary on a temporary basis.

Sell Surplus Inventory

A very common problem in a business experiencing financial distress is surplus inventory.

The business continues to produce products at the same rate. It has been unable to sell the products at a rate to keep the inventory at reasonable levels.

Surplus inventory is a big problem; and a big asset for a quick turnaround.

  1. You have valuable money tied up in the labour and raw materials that you have paid to produce the product.
This is your cashflow which is stalled while it is parked in inventory.
Even worse, if you are paying high interest rates on an overdraft or short-term debt, your inventory is costing you that as well.

  2. The longer you keep inventory the less it is likely to be worth because;

  • The more likely it is to deteriorate.
  • Customers will find some other product that does the same job.
  • The purpose that the inventory was designed for no longer exists.
  • The product has a life span (e.g. food stuffs) and once this life span is exceeded, the product has no value at all.

A very quick way to get cash into your business:

  • Sell surplus inventory as quickly as possible.
  • Even if you have to discount the price considerably.

Remember:
Inventory has much of your cashflow locked up.
Even selling at your cost of production will free up that money.
Until you sell it, you don't have that cashflow so your business' financial situation may continue to be dire.

Note:
When selling at a deep discount, try to differentiate the product and/or the customer you sell to.
This is so that people will not devalue your product permanently in their minds.
Think of selling to a different geographic location or a different type of customer.
Sell in larger or smaller quantities in order to avoid a potential trap of teaching your preferred customers to wait until there is a fire sale.

Sell Surplus Equipment

Do you have equipment surplus to your immediate, and even your short term, needs?

This is a good time to divest yourself of any such equipment.

Example:

  • More leased vehicles than you really need.
  • More expensive vehicles than you need.
  • Down-size or re-size your vehicle fleet.
  • Machines sitting around that you no longer use.
  • Sell surplus equipment to another party.

Remember:
Much of this machinery will have been depreciated from your accounts.
Although it has a much lower value to you than when you purchased it, it may have more value in the minds of a buyer.

Quick Product Review

If you have the luxury of having good records on your sales, you may find some of your products have gone up in sales volume and others have gone down.

  1. Sales volume gone down:
Give this some quick attention in case there is something that you can rectify and get an increase in value from them.

  2. Sales volume increased:
Capitalise by producing more of that product for sale.
It is a fundamental law that the products you run out of first are the ones that are the best sellers; something that is not selling sits on the shelves.
If you are not replacing your best-selling lines as quickly as possible, you are foregoing sales.
The amount that you are missing out on can be substantial.

For more on this, read our "Under and Overstocking" article.

  3. Change your product line to introduce products that are more attractive. In the very short term, you could do this by selling those products on behalf of another party.

  4. A little bit of comparison shopping with your competitors may indicate products that they are selling and you are not.
With this knowledge, add additional products to your range.
Improve your sales quickly without all the problems of inventory and supply chain.
See whether selling that product is going to work for you.
If it does, start to produce your own version of that product rather than selling it on behalf of another.

Increase Your Prices

It may seem a little contra-logical to talk about increasing your prices at a time when you are suffering financial stress.

Maybe you are thinking “surely, that means that I will sell less!”.

But that is not necessarily so.

  • Product range or services in competition with other suppliers in your area:
    Price low/competitively to keep your customers.The 80/20 Rule (see The Amazing 80/20 Rule) suggests that up to 80% of your products/services may need to be priced in this competitive manner.
  • The same Rule suggests that around 20% of your products/services may have some element of exclusivity, uniqueness or premium value. The price for these could be increased.

Independent research has suggested that a price increase of as little as 1% can lead to a 20% increase in profit (see How 1% Price Change Could Give 20% Profit Increase) because;

  • Extra income from the increase in price is 100% profit.
  • There is no increase in either the Cost of Goods Sold or the Fixed Costs associated with that product at the higher price.

The more products that you can increase the price on, the more profit you will get from the sales of those products.

If you are uncomfortable increasing the price, or are uncertain how much the market will "bear";

  • Experiment with a slow increase for one calendar month and see whether you meet any price resistance.
  • If none, increase it by a small amount again and so on until you sense that there is some price resistance.

Keep in mind that you may lose some customers during this process.

If they are only very small customers:

  • The associated increase in profit more than offsets the loss of a small volume of sales.
  • Especially if you are dealing with price sensitive customers.
  • They will always look for the "best" deal rather than appreciate any premium services that you have to offer.

Decrease COGS

Your Cost of Goods Sold (COGS) is often called Variable Costs.

It refers to any expense that is only incurred when you produce an item.

COGS is:

  • Raw materials that go into the product.
  • Consumables like energy.
  • Casual or outsourced labour.

Permanent labour is more of a fixed cost because you can’t raise or lower it easily.

Reasons for Change

Do you have historical accounting data?

  • Look for changes in each of the Variable Cost categories between accounting periods.

Typical categories are:

  • Non-permanent labour.
  • Energy and other utilities.
  • Raw materials.
  • Packaging, shipping and transport.

Category Changes

The Cost/Revenue ratio:

  • Shows the relationship between Revenue and Costs as a percentage.
  • As it is shown as a percentage, this automatically compensates for any increase or decrease in Revenue or Costs.

Example:

Calculate a Cost/Revenue ratio of a cost category, for example, labour to revenue.

Year 1:

Revenue = $1000
Labour = $100.
Ratio is - Cost/Revenue or 100/1000 = 10%.

Year 2: If the same calculation gives you 20%, the cost of labour as a component of Revenue has gone up.
You are putting more labour expense into the product.

Consider why labour has gone up:

  • A wage increase is the first thing you would consider.
  • Less efficient labour, more is required to do the same amount of work.
  • This might mean a change in work methods or machinery which is using more labour.

When you have multiple possibilities like this, the 5 Why’s Problem Solving Technique can be useful to work out what happened.

If any of your categories of costs are changing, add them to the spreadsheet that we discuss in “Metrics” below.
This allows you to keep a watchful eye on them in the future.

Has the category analysis assisted?

  • Revisit your accounting system and create separate line items for the following:
    • The categories that are fluctuating the most.
    • The categories having the biggest impact.

This will make it easier to track this data in future.

Gross Margin Ratio

Gross Margin is:

  • A measure of how well a company controls its costs.
  • The percentage by which Profits exceed production costs.
  • The overall relationship between all Variable Costs and Revenue.

Above, we discussed differences in each of the categories, not the overall relationship.

The Gross Margin Ratio:

  • Automatically adjusts for changes in Revenue and COGS which might move in different directions and be hard to interpret by themselves..
  • If it goes up, you are doing better financially.
  • If it goes down, you are doing worse.

To calculate:

  • Divide Gross Profit by Revenue = Gross Margin percentage for each period.
  • Gross Profit = Income - COGS

The figures come from your accounting system.

Example:

Figures last year were:
$200 Gross Profit / $1,000 Income = 20% Gross Margin.

Figures this year:
$100 Gross Profit / $1,200 Income = 8.3% Gross Margin.

The Gross Margin Ratio has fallen from 20% to 8.3%.

We can see this is true:

  • Gross Profit has fallen from $200 to $100 (halved).
  • This is despite Revenue going up - $1,000 to $1,200.
  • This means that though sales have gone up we are not controlling costs.
  • Our Gross Margin has gone down.

Some of the likely changes may be:

  • Income increased and Gross Margin increased: 
    Your income has gone up and your COGS has actually fallen in proportion.
    This is a good thing and means your problem is likely in Fixed Costs.
  • Income increased and Gross Margin fell:
    Although you earned more Income, your COGS have risen even faster making you worse off.
    This may mean raw materials, labour and similar inputs have increased in cost. Selling prices have not increased to compensate.
    You should put up your prices and/or reduce your costs if possible.
  • Income fell and Gross Margin rose:
    Even though your sales fell, your COGS fell as well and you are actually better off.
    The problem likely lies in your Fixed Costs.
  • Income fell and Gross Margin fell:
    Your sales fell and costs got higher so your input costs like labour and raw materials may have gone up.
    You might be buying raw materials to manufacture but not selling what is produced.
    This is an inventory problem.

Reduce Staff

You might think of Labour as being a variable cost but, in reality, if your employees are permanent, they are an Overhead or Fixed Cost.

  • If you employ contractors:
    See if you can cease using them, either permanently or temporarily.
    It is possible that you have surplus capacity within your permanent staff that might address these areas. Even if it is only for the short term.
  • Does your business income fluctuate?
    Consider employing more contractors rather than permanent staff. This allows you to not use the contractors in the downturn.
    It is difficult to let a permanent employee go whereas it is relatively simple to let a contractor go.

Manage Your Stock Purchases

We have already spoken about completed inventory and Work in Progress (WIP) above. This included the hidden destruction that it does to your cashflow and therefore your profitability.

Do you have stockpiles of the raw Materials for your production cycle?

  • Try to consume these stockpiles before re-ordering.
  • Try to reduce the batch size of each inventory replenishment order.

The traps of quantity discounts:

  • It is easy to get seduced by the idea of a quantity discounted price for your raw materials.
  • You outlay cash on a stockpile of resources that you are not going to consume for several months.
  • The money outlaid is tied up in the stockpile damaging your cashflow.

Even worse:
If you have purchased using a bank overdraft or have a lot of debt on credit cards to pay for your stock:

  • The interest associated with the finance will very quickly remove any financial benefit from quantity discounts.

Also, keep in mind that your materials stocks can suffer from the same problems that your final Manufactured Inventory does.

For example, it can become redundant or life expired.

Immediately develop the following discipline:

  • Do not allow anyone to repurchase stock without your specific approval.
    • This immediately allows you to determine whether that stock is definitely necessary
      or
      if someone is ordering on autopilot
      or
      in a "just in case" scenario.

The concept of "Just In Time" (JIT) ordering is well known amongst larger, successful, businesses.
JIT ordering arranges for stock to arrive only when it is required.
It maintains as little as one or two days (and sometimes only one or two hours) of stock at any point in time.

Explore buying smaller quantities at more frequent intervals. This allow a match between raw material orders coming in to products going out.

Profit Savvy has several articles on Inventory Management (see the menu on Profitable Inventory Management)

Managing your stock is something that almost any business can do immediately. 

Decrease Fixed Costs

Fixed Costs (AKA Overhead Costs):

These are the expenses of your business that do not vary to any great extent with the amount of production or sales that you undertake.
They include things like staff, rents and finance/loan repayments.

You may be able to immediately reduce or change some of these fixed costs.
This will stabilise the business and get it back onto a path of sustainability.

Reasons for Change

Comparing the accounting figures from two periods will give you an idea of the effect changes in Fixed Costs will have.

Example:
Compare Rental figures over 2 years.
Year 1 - Rent = $1,000
Year 2 - Rent = $1,500
Rent has increased.

Allow for changes in Income, through increased or decreased sales, by using a ratio.

Year 1 - Fixed costs of $100 divided by Revenue of $1,000 = 10%
Year 2 - Fixed costs of $120 divided by Revenue of $1,500 = 8%
We can see that Fixed Costs, as a proportion of sales Revenue, have dropped (a good thing).

If the percentage had gone up, Fixed Costs would have increased.
Your attention is immediately drawn to looking at what caused the costs to worsen.

To work this out, look at the changes in the ratio for the individual categories (e.g. rent, finance, labour).

Say the labour ratio improved by 3% between the years but the rent ratio worsened by 5%. Rent is your problem, not labour.

Staff Related

We have already mentioned some issues to do with staff in connection with the COGS.

Permanent staff are essentially a fixed cost because they don't vary from month to month. There are several ways of reducing the fixed costs of your staff.

1. Redundancy:
If you no longer have a need for some of your staff, begin a process for letting them go.
If your business is in financial trouble some regulations, that might otherwise prevent you from letting staff go, may be waived.

Read more on who, what and how to manage redundancy in the Profit Savvy article on "Redundancy Planning".

2. Outsource some of your permanent staff: They can;
Work for others in the short term, as a way of off-setting their expenses in your accounts.
Work for you full-time but become permanent part-time for another employer.
This can work for both you and the other employer.
You both get some flexibility and it reduces your costs.

3. Staff annual/unpaid leave:
Unable to use staff at the moment? Ask them to go on annual leave, if it is permitted.
This avoids them using annual leave later when you need them.
By mutual agreement, staff could take unpaid leave which gets them off your books.

Reducing Premises Expenses

Do you own or lease a premise as part of your business?

Reduce the associated expenses:

  • If you no longer need some space, try to sell or cancel the rental on that space.
  • Other costs associated with the premises - air-conditioning, energy and other utilities.
    You might be able to introduce some quick economies in this area, even if it inconveniences staff in the short term:
    • It might be possible to "lock off" parts of your premises.
    • This reduces the lighting and/or air-conditioning expenses for the period of the turnaround.

Re-Negotiate Finance

Your finance falls into two categories; short term and long term.

Short term finance:

  • Credit card debt
  • Overdrafts
  • Short-term bridging loans.

Typically, this short-term money has a very high interest rate. 
This can make a significant impact on your business.

If your business turn around is going to take some time:
Convert some of the expensive short term debt into longer, more economical, debt.

Suggestion: a one year loan to replace your shorter term debt.

  • The approval and the interest rate you pay will depend on the general health of your business
    and
  • Other assets you have that can be used as collateral to the loan.

Longer term finance:

  • Change large monthly payments to once a fortnight smaller payments.
    • Ironically, this will dramatically reduce the amount of money you re-pay to those loans.

For more on this go to the Profit Savvy article Profit Autopilot - Piggy Banks (scroll down to Debt Management, Mortgage Repayment Saver).

  • Equipment leases for office equipment, vehicles, tools and plant:
    • Try to re-negotiate these leases.
    • Convert them to some other form of debt or get a "holiday" from the payments.

Leases are complex financial calculations, you may want to get the advice of a finance broker or accountant to assist you handling this.

Improved Cashflow

Cashflow is the lifeblood of your business. We cannot stress this enough. 

Things like Revenue and Profit can be fudged whereas cash in the bank (Cashflow) cannot.

Example:
Revenue of $1,000,000 might look great until you realise the Expenses are $2,000,000.

Accounts Receivable

The process of billing and collecting money that is owed to you.

It is very common for many distressed businesses to have a poor record for collecting their Accounts Receivable.

  • This has a direct and immediate impact on your cashflow.
  • And on the financial health of the business.

If you find yourself struggling to understand the accounting terminology, invest some time with an accountant.
Alternatively, get advice from someone who is more familiar with accounting processes.

A major review of your Accounts Receivable system early in the DP30 turnaround project is very important.

Improve your financial status by:

  • Making sure you pay your suppliers less frequently.
  • Paying over a longer period of time than you get the money in from your debtors (the people who owe you money).
  • Not outlaying your money to a supplier until you have the money in from your debtors.
  • Not using your scarce cash to fund the time gap between money out and money in.

Profit Savvy discusses more about Accounts Receivable in the article Accounts Receivable Management.

The Cash Conversion Cycle, which looks at money in and money out, is covered in the article Measuring Net Cashflow.

Has your Cashflow changed?

Within your historical accounting data, can you see if the cashflow has changed over time? Can you see what is causing it?

In the earlier sections, historical accounting data has helped you see if the problems you are having are due to a fall in income and/or a rise in costs.

If your problems can’t be explained by those two, what else might be happening?

A couple of candidates are outlined below.

Not Collecting Your Debts

Calculate a ratio of Debtors / Income for two points in time (say a year apart).
This will give you something you can compare.

Example:
Year 1 - Debtors $100 / Income $1,000 = 10%
Year 2 - Debtors $230 / Income $1,500 = 15%
Your debtors compared to income is higher in Year 2 (by 5%)
You are getting worse at collecting.

Doing this measurement once a year is not a very good check.
That 1 month might have been a freak event.
Do this each month or quarter so you can see if it is trending in a better or worse direction.
Add this to your critical metrics spread sheet, discussed under "Necessary Metrics", below.

Paying Your Debts Too Fast

Get into the habit of entering all the debts you have to pay into your accounting package as soon as you get them.
Bill your customers through the same package.
Your accounting package can now give you “Aged Debtors” and “Aged Creditors” reports.

This report will give you what you owe (Debtors) and are owed (Creditors) broken into time periods.

Example:

  • Under 30 days
  • 30-60 days
  • 60-90 days and
  • over 90 days

At each time division, you want your Debtors to be more than your Creditors.
If so, you are not paying your debts faster than you are collecting money owed to you.

Store this monthly in the critical metrics spreadsheet discussed under "Necessary Metrics", below.

You will be able to spot any adverse changes within a short period and correct the problem.

Factoring

Are you experiencing a slow payment of money that is owed to you?
There are solutions.

Example:
In the building construction game - it is common to outlay money for labour and materials prior to getting a partial progress payment on the construction.

Sell this debt collection to "Factoring Agents".
Factoring Agents look at the quality of your Accounts Receivable and pay you so many cents in the dollar immediately.

Benefits:
You will have a steady cashflow.
Is a solution where your cashflow is sluggish or comes in lumps.

Negatives:
Factoring will cost you money for the provision of the service. 
It does not insulate you from debts that actually go "bad" and are never repaid.

Do not use:
When the debts are easy to collect.
As compensation for failing to collect your debts on time.

Necessary Metrics

Were you surprised at what you found when you first looked at your accounting records?

This should indicate two things to you:

First - you should increase the frequency at which you look at your results. 

  • You are much less surprised.
  • You can respond sooner to any positive or negative change in the trends from your reports.
  • This will either minimise losses or maximise gains.

Second – you need to give thought to the things to look for when reviewing your records.
We call these “metrics” referring to the fact that they measure things.

  • A business that looks at their books once every 12 months is going to experience surprises and probably difficulties. 
  • Look at your books each month or at the least, each quarter, to measure a few important trends.

Earlier in this article, we talked about four major items:
Sales, COGS, Overhead / Fixed Costs and Cashflow.

Open a simple spreadsheet listing each of these figures for each month.

  • Spend some time each month looking for trends.
  • If something is improving - spend some time thinking about why it is improving.
  • You can maximise that improvement.
  • If something is worsening, catching that fact early allows you to try to do some focused remedial exercise to improve it.

We also discussed the value of calculating Gross Margin in the discussion on COGS.

  • Set your Spreadsheet to calculate this automatically.
  • Use the formula we provided in the COGS discussion above.

DP30 looks at a 30 day program.

  • You are not going to collect a lot of data in this first 30 day period.
  • If you have historical data, add this to use as a "benchmark".
  • Compare it to what happens in the first 30 days and after DP30.

Don’t spend a lot of time on your Spreadsheet now, it will not help you survive right now.
Get your bookkeeper to start to put one together.
It will change and grow over time so don’t expect to get it all done in your first pass at it.

It is easy to focus on the wrong ‘metrics’.

Many people focus on two "vanity" metrics that sound good but can give the wrong impression.

Example: Income

  • You sell $100 worth of product, which sounds great.
  • If it costs you $101 to produce that product, you are actually going backwards.
  • Income is not a good measure of the health of your business.

Example: Profit

  • A less than ideal measure of the success of your business.
  • By the time it has had various treatments for taxation purposes, it may not reflect the actual health of your business.

The one safe metric of your financial position is your Cashflow.

  • This is your ability to convert labour and raw materials into cash at the Bank.
  • It is the volume of money hitting your bank account.

See more about cashflow in other articles (see the Money Management menu)

Take out Insurance

If you have followed the above, you are well on your way to overcoming your financial problems.

Do you want peace of mind that you will be able to pay your debts when they fall due?

Do you want to reduce the possibility of similar financial problems?

Structure your Financial Management Systems by following these Profit Savvy suggestions:

1. The Profit Autopilot series of articles describe a different approach to the Finances of your business.

  • It structures your finances to guarantee you the Profit you desire.
  • It then advises you on how to structure the business to achieve that Profit.
  • This replaces the traditional accounting for Profit as the amount that is leftover after your Income and Expenses.

2. The "Piggy Bank" series of article and video, show how to setup several Bank Accounts for specific aspects of your business.

  • Money is then allocated to those accounts according to the need.
  • Necessary Expenses are quarantined away from your principle Bank Account.
  • This prevents you inadvertently spending that money and finding you have nothing left to pay that debt when it falls due.

Example:

  • You pay a Bank Loan at the same time each month.
  • Set up a special-purpose Bank Account that does nothing but hold money for your loan payments.
  • Transfer money into the account during the month, using an auto transfer function available at your Bank.
  • The necessary sum of money is available to pay your loan at the end of the month.

Proof in the Pudding

You may be thinking:

  • Changes discussed in this article are comparatively small.
  • They are not likely to have too much of an impact on your particular financial situation.

You might be very surprised to see how little things need to change for you to Double your Profit.

Have a look at the table in our introductory article to DP100 - Introduction to Double Profits in 100 Days.

By increasing Revenue by 5% and decreasing costs by 5% our example shows a 54% increase in Profit.

Longer Term Survival and Growth

You have read about and begun to execute DP30.
You have a more informed understanding about the longer-term sustainability of your business.

Have you decided:

  • That long term survival is unlikely.
  • That you are not excited about running the business any longer.

Read about how to position your business for an exit/sale in the Profit Savvy article "Profitable Business Exit Sale". 

  • That you want to continue with your business.
  • That you have become quite optimistic about your business.
  • That you can see an opportunity for substantial growth.

DP30 will have indicated areas of weakness and opportunity within your business for further streamlining.

Example:
DP30 hasn't looked, to any extent, at increasing your Sales to your regular customers.

Your next steps:

1. Streamline your existing operation with Double Your Profits in 100 Days (DP100) Profit Accelerator program.

2. Grow your business as fast as possible by launching into Double Your Profits in 365 Days (DP365) Profit Acceleration strategy.

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