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Running your own business is a very rewarding experience, but most SME owners are faced with the same problems, lack of time and limited resources, and opportunities to sit back and reflect on how your company has been performing and whether there is room for improvement are scarce.

But Christmas is upon us, with many companies closing for the summer, so there is no better time to plan for the year to come.

• Analysing your client base and profit

Understanding who is buying from you, how and when is crucial to maximise your profit. The data relevant to you will depend on whether you are a B2B or retail company, but the key figures you need in order to understand your business better are:

a) Breakdown of your business with each customer, in terms of revenue and percentage. This will help you identify weaknesses such as being too dependent on a single or handful of very big customers, or readjust the resources you may be investing in customers that are too small to matter.

b) Breakdown of new vs repeat business: a healthy business should show a good percentage of new business, but the amount of repeat business is also a key indicator. If most of your turnover comes from new business, this may be a sign that your customer service is lacking or your products unsatisfactory, or that you need to increase your marketing efforts to keep your company in customers’ minds.

Recruiting new customers costs a company four times as much as keeping existing ones so it is well worth investigating how you can do more business with your current clients.

c) Analysis of your margins: your biggest client isn’t always your most profitable client. If, for example, they require a lot of time and attention, you could find out that they are not as desirable as smaller clients who are easier to please. Having said that, there are also strategic aspects which could justify keeping a customer whose margins aren’t fantastic: they may be a gateway to a market you want to break into or they may order large quantities of items which lowers your production costs and enables you to make greater margins across the board.

d) Price Structure: If you don’t know who your competition is, now is the time to find out! It will help you to check whether you are pricing your products and services right. Lower prices may make you more attractive, but you need to make sure you are still making money and maximising your profit.

• Analysing your costs

a) Processes: most probably one of the less glamorous areas of business, it is nevertheless a crucial one, as efficient processes mean increased productivity and therefore profit. Processes will vary greatly depending on the nature of your company, but what you should be aiming for is eliminating duplicate work and unnecessary paperwork, and improving communication internally, with suppliers and customers to implement a workflow as streamlined as possible.

b) Costs of Sales: costs of sales cover any expenses incurred to make sales happen. It could be sending sample to prospective clients, client meetings or staff time. Make sure that it isn’t disproportionate compared to the value of the sale.

c) Overheads: often a large percentage of a company’s budget, they include salaries, office space, stationery, taxes, etc… Those costs are the most difficult to influence but you need to have a clear understanding of their amount so that you build them into the costs of your products and services. Making better use of human resources and space will help you keep things under control, and hiring an accountant to look after your finances will make a big difference, as they can advise you on how to manage your company so that you are tax efficient.

Not everyone enjoys crunching numbers, but we do, so if you need help understanding your business better and making it more profitable, contact Balanced Group on 0800 422 526 for a no-obligation consultation, or refer to our Contact page and we will show you the difference an accountant can make to your company.

In the meanwhile, we would like to wish you a merry Christmas and a happy New Year.