Anyone who is making their way will understand these, even if they don’t stop to identify them in the context of their own situation. The 5 components are:
1, Product or service – you need to have something that people want and are willing to pay for.
- Marketing – how do they know about your particular product or service and can show interest in your offering?
- Sales – the process of crystalizing that interest to the point that they are willing to reach into their pockets and pay you money.
- Fulfilment – how are you going to deliver your product or service to your customers in a way that makes them happy and want to come back for more?
- Accounting – how do you know you are making sufficient money i.e. profit, such that you can continue in business and also to give you sufficient reward that you actually want to continue and do the whole thing again?
But there is so much more. However, as broad categories these are a good starting point albeit they are just the broad headings under which you undertake so many other functions.
One of the more important considerations is why you want to do what you do. What drives and motivates you to do what you do? There are no easy businesses these days. I am not sure there ever were, but it is certainly tough out there and likely to get worse. So, what gets you out of bed every morning, gets you through those bad staff days, keeps you on track when everything seems to be going wrong, or you wake up early in the morning worrying about cash flow, or you have just got that letter from HMRC?
That’s when things get interesting. I have often asked myself why I continue to do what I do. In my case, I don’t think it’s any one thing. I like the cut and thrust of business. We have made 4 acquisitions so far of other accountancy practices and I enjoyed each of these. I enjoy seeing our turnover rising and hitting the next milestone. I enjoy getting to the end of each day having survived the various crises that have arisen either for one or more clients and within our own business. And I enjoy the feeling that I sink or swim on my own efforts.
While I enjoy seeing profit in our accounts, and just like everyone else, don’t like paying tax, I recognise that this in itself is far from being enough to motivate me to do what I do. We have always put in a good shift, working long hours and many weekends but you cannot do this over a long period of time purely driven by profit. There has to be something else.
There is a quote I came across many years ago:
Profit is like oxygen, food, water and blood for the body; they are not the point of life, but without them, there is no life.
“Built to Last” by James C. Collins and Jerry I. Porras
What this means is that if you have no profit, chances are you don’t have a business. Losses are akin to pound notes flying out the door. No profit, no cash, no business. And if you are trying to sell your business, no profit probably means no value will be placed on any goodwill.
There is another “truth” in that a customer who does not pay is not a customer. We all have a few of these. The important thing to remember is that if they are not paying you, they are either going under or do not value your product or service highly enough, so stop handing it to them for nothing.
We see countless examples of people who think that business is easy, often just after they have discovered that it is not. They think that running a shop or a B&B is simple. It is, but making a profit from it takes a lot of thought and discipline, which often only comes from experience working in that sector. I have seen similar shops, in similar locations. The shops are similar and the catchment area is much the same, but one shop is thriving and the other has cash flow issues and low profitability. You need to know what you are doing and understand the rules of the game.
Hard work, in my mind, is an essential part of running any business, at least in the early years. However hard you work it is never enough on its own. Our turnover has gone up 10 fold or more since Helen and I started in business together. Hard work, motivation and a willingness to innovate and seek new challenges are at the core of this growth. And knowing our stuff!
So, what drives you?
Alan E Long
The Long Partnership
07770 738770
