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Big is not always beautiful!
It may seem strange advice to beware of winning big contracts. After all most small businesses dream of catching that biggee which will set them up for the future. However, many a great small business has failed because they won a big contract with a large corporation.
The biggest problem is cash flow.
Large companies will often demand slow payment terms, which means it can be several months between paying employees and suppliers your end and receiving payment for your services. It is important to remember that even if you have agreed 30 day payment terms the cash will usually come in quite a but later than that. This is particularly problematic in the current economic climate where banks are reluctant to lend money to tide you over the interim period.
If a large proportion of your business is geared to fulfilling one large contract you leave yourself exposed should the large company you are dealing with has financial problems themselves.
Also, if you have to neglect your traditional client base whilst you complete the large contract you may find you have no business left one the contract is finished.
Now, I am not suggesting you never bid for large contracts. What I am saying is go into the process with your eyes open. Put away your rose tinted spectacles and examine fully what winning the contract will truly mean for your business. Are you prepared to accept the risks as well as the rewards?
Finally, there are professionals out there – such as your accountant – who can help you, so use them.
Fiona 🙂
Cash is King!
Cash is king! and managing it properly is one of the best ways of ensuring your business flourishes. However, many small business owners find it a real challenge to chase customers who are late paying – even though not doing so leaves them in a really tight situation with the bank.
A phrase we hear often is, “They’re a really good customer, so I don’t want to annoy them by chasing for payment”. Let’s just analyse that sentence for a minute. Why are these customers good for your business? Because they allow you to do lots of work for free? Surely, a good customer is one who appreciates your efforts and is happy to pay because they value you. If you have done the work you agreed with your customer, to the level they expected, why should they not pay the agreed price in the agreed time period?
So don’t be shy about collecting YOUR money.
Other problems we see regularly are:
– Not setting payment terms up front
If you have not agreed when the customer should pay BEFORE the work is done, you will struggle to collect the money in a reasonable time frame. Make sure your terms of engagement/purchase confirmation clearly state when you expect to be paid.
– Setting unnecessarily long payment terms
Don’t assume that you have to offer customers 30 or 60 day payment terms. Start from a position of offering zero payment terms and only offer extended terms if there is a commercial advantage in doing so. Bear in mind that even if you offer 30 day terms you will most probably be paid later than that. As you don’t know the financial position of all your customers the only safe money is the money in your bank account.
– Not sending invoices out promptly
If you do not send out your invoices as soon as the work is complete, you automatically build a lag before you receive payment. Invoicing is a chore, but regular invoicing is vital to achieving financial stability.
The most common reason small businesses fail is because they run out of cash.
The most common reason they run out of cash is because they do not collect the money they are owed quickly enough, or allow debts to go bad.
Make sure you business succeeds by being cash collection savvy.
Fiona 🙂
Trying to be a superhero?
Is this story familiar to you? A business person who is successful in their field but starting to get bogged down in the day to day running of their business. In particular, administration and bookkeeping are starting to grind and take the shine out of their enjoyment of their businesses?
This is a common story but one that has a simple solution – DELEGATION.
We may have many ‘good’ reasons why delegation is hard and why we should do all the ‘easy’ jobs in our businesses:
– it can be expensive to pay someone else
– perhaps they will do the job wrongly or prove unreliable
– it will take time for them to settle in and the process will be distracting
However, you cannot escape the truth that however much you try to ‘create’ time by managing it better, there will only ever be 24 hours in a day! We cannot, like Superman, create extra time just by wishing for it.
So I would answer each of the objections above like this:
– You are much more valuable to your business than you may credit. Your time is likely to be worth much more to your business per hour than the £15-£20 per hour you might need to pay an administrator/bookkeeper.
Also there are jobs which only you can do in your business. These undelegatable jobs include creating business strategy, and leading and managing your business (even if you work alone your business needs to be managed!). If administration and bookkeeping are keeping you so occupied you do not have time for strategy, or management, then your business will suffer considerably.
– Are you really sure you are the best bookkeeper/administrator anyway! Surely you did not start your own business to play around with the books or to file!
– If you engage a trained bookkeeper they will settle in very quickly. Also, because they already know what to do as a bookkeeper you won’t have to spend time showing them what to do.
So do yourself a favour. If you have too little time to do the important things in your business – DELEGATE!
Fiona 🙂
What do you resolve?
It’s that time of year when we come up with fantastic ideas and resolutions for the year ahead. Unfortunately, these ideas and resolutions, which seemed so fantastic in 2013, will have been forgotten very early on in 2014. The reason for this is that we tend to come up with woolly, general thoughts rather than a real plan for change.
How about making this year different? If you really want to change your business, your work/life balance, your effectiveness or any other aspect of your life, you have to think through what you want to achieve. What are your timescales? What are your specific goals? How will you measure change? What resources will you need? Who do you need to help you?
Once you have thought through all the aspects of your idea write them down so you have a point of reference – and then DO IT!
By taking the time to plan you will find it much more likely that you will keep your resolutions and move forward.
Don’t wish upon a star – reach for it!
What’s your plan?
Well, the new year is just around the corner, but do you have a robust plan for the year ahead?
Unfortunately for many small business owners the answer is a resounding “No” – or, “yes, it’s in my head”, which is actually the same as no!
If you don’t have a proper plan for your business the chances of it moving in the direction you want are drastically reduced. Your business is more likely to grow by luck, rather than design, and luck is often in short supply in times of economic difficulty.
For many the very thought of putting a plan down on paper leaves them in a cold sweat – but it doesn’t have to be this way!
Firstly, remember that the person for whom you are preparing the plan – and the most important person in your business – is YOU. So, think about planning in terms that you can relate to rather than trying to plan with someone else in mind.
If you like mind maps plan using them. If you are a picture person try to build lots of pictures into the plan so you can engage with it.
Secondly, if you really don’t know how to plan – ask for help. You may have a friend or family member who can help you. Alternatively, there are lots of professionals who can help you with specific areas of your plan.
If you struggle to put together a marketing or sales plan engage a marketing or sales expert to help with that particular section. If you struggle with the figures your accountant should be able to help.
The key thing is that once the plan is finished it properly represents your business and your ideas for the coming year.
Your plan then becomes the foundations against you can measure the performance of your business going forward. You will be able to see whether or not your business will help you to meet your personal goals, or not, and you can use it to get finance if you need to.
Fiona 🙂
A time to pay – part 2
This post is a follow on from ‘A time to pay’ so if you haven’t read that you might like to do so before reading this one!
Once you have decided on your payment terms, ensured that both you and your client understand what is to be delivered, and paid for your services, there is still the possibility that a client will let you down and not pay.
The most likely scenario is that the client is strapped for cash and you are not seen as the first payment priority for them. This is a difficult position to be placed in for any service provider. My advice is that you must stand firm and by doing so you may well move yourself up the payment list – especially if the client is looking for further work from you.
Just as an aside, I generally provide an ongoing service to clients and so agree with them a fixed price service, so they can set up monthly standing orders. This has proved to be a win/win strategy. Clients like it because payments are broken down into monthly bite sized payments and I like it because I don’t have to do monthly invoices and then chase for payment.
However, what I did not appreciate until a client pointed it out to me was that, for them, my payments had moved up into the ‘unavoidable’ category – along with rent, rates, electricity etc. Unlike other professional service bills which are paid as and when money is available, my payment is made as one of the first.
Now, many service providers get lulled into doing more work for a client who is not paying, because they believe that they will not be given further work if they insist on being paid. As in my previous blog I would most strongly urge you not to get into this way of thinking. Firstly, the surest way of getting paid for work done is to stop working until payment is made. Secondly, if the client is bad at paying why would you want further work from them – rather than using your limited time to work for a client who will pay!
If a client is unlikely to use your services again, you are in a psychologically stronger position. You may well not be so reticent in sending tough letters demanding payment. Or, in fact, starting legal proceedings. If you want to go down this route it is very important that you understand what your rights are and how best to proceed. My advice would be to use a payment collection service such as that provided by companies like Credebt. They take the hassle away and enable you to concentrate on more positive areas in your business.
Finally, as I said in my earlier blog, don’t be coy about collecting money owed to you. As long as you have done the job required, and to the standard agreed, you are entitled to be paid!
Fiona 🙂
A time to pay!
Recently I have come across several service providers who are finding it difficult to get paid. This got me thinking about the psychology of payment.
There are clearly two sides to this particular coin – us and the client. We can be as much, or more, to blame as our customers for not getting paid, because of the way we think and act.
Firstly, as Brits we are sometimes embarrassed to talk to clients about fees and payment. Some business owners hide behind hourly rates, which means there is no upfront agreement about exactly what the client will be expected to pay. This means it is highly likely there will be disagreement and therefore delay in payment. Not only that, but disagreement about fees can leave a bad taste in everyones mouth.
Secondly, many service providers are slow to invoice, which means clients receive bills quite a long time after they have had the service. This sends a message to the client that the supplier is probably pretty well off and so doesn’t need the cash quickly (or the invoice would have been sent more promptly). Consequently it is more likely that payment will need to be chased.
Other suppliers do not make it clear what their payment terms are. Now, it is in clients interests to delay payment as long as they can (especially at the moment when many businesses are finding cash flow difficult) so if you are not clear on payment terms you cannot be surprised when payments don’t come through. Make sure your letter of engagement clearly states what your payment terms are and re-iterate these terms on your invoice.
Further to payment terms ask yourself the question ‘Am I a bank?’ If the answer is no (as I expect it is for anyone reading this blog) only give credit if it is absolutely necessary – and then ensure there is some allowance for interest in the price you are quoting! Otherwise, make your payment terms ‘payment on receipt of invoice’. You probably won’t get paid immediately but at least you can chase earlier.
I know business owners who don’t like chasing for payment, even if they have agreed a fixed price, invoiced promptly and have clear payment terms, because they think their good clients will think badly of them. This, in my opinion, is the worst ‘sin’ of all. Firstly, GOOD clients pay as agreed in the contract – a good client is not one who bitches about the agreed price and then fails to pay promptly. Secondly, we are business people who should expect to be paid for a good job done, so there is nothing to be coy about when it comes to asking for what you are legally and morally entitled to!
So, to recap:
1. Agree clearly with your client the exact terms of the engagement both in terms of job to be done and fee to be paid.
2. Bill as soon as the job is complete.
3. Be clear on your payment terms and give as little credit as possible.
4. Be professional! If money is owed to you do not be coy about chasing for it.
Fiona 🙂
Book Billy!
Are you a business owner who works on their own or with just one other person?
Do you miss the traditional office Christmas party, where everyone let’s their hair down and has a fantastic laugh?
If so the Billy No Mates Christmas bash is for you – so if you haven’t already booked now is the time to do so!
The ‘Bash’ is on 20th December (so the Friday before Christmas) from 12pm onwards at Beah, Union Street, Wells, Somerset.
For just £22 for a three course meal with wine the ‘Bash’ is great value – and great fun.
But don’t just take my word for it:
Kim Robinson who is a Billy No Mates stallwart said: “The only thing missing is the photocopier!”
To book your place or simply to find out more go to:
http://billynomates.info/events/wells-christmas-bash-2/
Fiona 🙂
The price is right!
The new year is looming and now is the perfect time to review your pricing.
Many business owners struggle with putting their prices up, particularly during times of economic downturns, even though their costs are increasing. They leave their prices the same for several years and then have to put their prices up significantly in one go to stay profitable.
However, reviewing prices on a regular basis (say, once a year) is a much better way. Customers are much happier to accept rising prices if increases are regular but small, than they are with irregular, large price increases.
So, make sure you review your prices regularly.
The key to doing this successfully is to make sure that your customers know that you have a particular time when you review prices – the new year is perfect for this. Preparing your customers properly for price increases means that the change does not come out of the blue, and they are more likely to accept it.
Remember, pricing is all about asking for a fair value for the product or service you provide. So, it is important that you are clear on what the fair value is.
Make sure you know what your competitors charge, but more importantly, talk to your customers regularly so you know what they particularly value about what you provide.This will make it easier for you to assess what price is appropriate.
If you are in the service sector the new year is also an ideal time to review the service you are giving your clients, to check if there is any additional work they need.
So, if it has been a while since you reviewed your prices bite the bullet and start planning for one now.
Fiona 🙂
Are you up for a party?
Running your own business can be great fun, but its sometimes a little lonely.
As with many aspects of life, this fact becomes particularly obvious at Christmas. Everyone else has an office party to go to – but not you.
The Billy No Mates Christmas Bash is all about changing this. It is the office Christmas party for anyone who works on their own or just with one other person. Come along and party!
In Wells our Bash is held at Beah, Union Street. To maximise the ‘end of term feeling’ it is held on the Friday before Christmas, at lunch time.
To find out more, find out what the menu looks like or to book please go to billynomates.info
See you there!
Fiona 🙂
Business Accountant 