Redefining Success

With the current business landscape, we’re all experiencing disruption and uncertainty – this is the new norm. As we’ve all had to adapt, no doubt there have been a few ‘flearnings’ for us all along the way.  A ‘flearning’ is a term we use because our biggest learnings come from our failures. How do you define success?

Of course, Covid is not necessarily a failure; the issue is that, what we’ve done in the past may no longer be as successful. So, we need to respond to those flearnings and reconsider what we’re doing.

In this blog we’re going to look at what success looks like for you, your business and your team and how your planning should reflect this.  We’ll dive into some strategies to grow your profit and cashflow to help you maximise the outcomes for all, to promote sustainable success. Then, we’ll look at how we can help your business with some free tools and additional support options before answering any questions you have.

Your new definition of success

Pre-Covid, success may have meant something very different to you. You may have had growth plans which have been disrupted. Given the change that covid has brought, some have fallen into the trap of working harder and burning themselves out in this pursuit, when in reality, there are other ways to potentially have you cake and eat it to.

For the purposes of this blog, we’re going to refer to an example business – a gym called The Rock, which is owned by a fictitious husband and wife, Dwayne and Jayne. The principles will be equally relevant for your business.

In our example, let’s say Dwayne and Jayne originally wanted to achieve £50k profit but were working long hours to get there. Now they’re thinking that more time with family is more important and are wonder if they can achieve that success with a lower level of profit, say £40k.

Remember that the business is there to serve you; not the other way round. By redefining what success means to you personally, it’s possible to build a plan around how the business delivers that. Defining what success means to you allows you to define what success looks like for your business.

But we mustn’t stop there; we also need to define what success looks like for our team. A happy and engaged team is not only good for them; it’s great for business too.

Success for you

Let’s start with your definition of success. In other words, what you want your business to deliver to you personally.

We refer to four things here:

• Your hours of work: do you really need to work such long hours? Can you spend more time with the family and still get by financially? In our example, Jayne would love to have Dwayne at home more to help with the children.
• Your role in the business: are there things you do at work that could be done by others to free up your time? In our example, Jayne would love it if someone else could do the VAT preparation so she can get her evenings back to watch Netflix.
• The cash you take from your business each week or month: if you reduce your cash demands, your business will be able to survive on lower turnover or alternatively you can employ or contract other people to do tasks you’ve done yourself up until now.  Remember, in our example where the cash demands may have been £50k in the past, maybe we can bring that back to £40k for Dwayne and Jayne.
• The holidays you want to take: where, when and how long for.

So, just as it is for Dwayne and Jayne, your definition might be quite different to what it was pre-Covid.

What do you need to be happy? Maybe you can get by on less cash from the business, and in so doing, take some work pressure off yourself.

Your personal budget

A personal budget helps us understand whether or not you can get by on less cash from the business. If you can make personal savings, you’ll reduce the cashflow strain on the business.

No doubt you’ve made savings during the various lockdowns. Or, you’ve changed your spending priorities – can these savings continue? Hopefully you haven’t increased spending online too much, especially if your business is under pressure.

We have a complimentary personal budget template you can use to ensure you don’t miss any expenses. Simply look at your bank statements online to see what you typically spend in a month. Go back 3-4 months to review your expenses and ensure your budget is realistic.

In our example, Dwayne and Jayne have determined that they can make things work on £40k – Dwayne is going to cut down on what he spends on supplements and Jayne is going to go walking with her friends instead of going out for lunch each week. They’re also going to have a camping holiday locally to reduce costs. Personal budgeting is a hugely empowering process.

Success for your business

Once we are clear on what success looks like for us as owners of the business, it’s time to translate that into business success.

If we go back to our example, in the past Dwayne and Jayne wanted the business to deliver £50k to them each year. Having done their personal budget, they’ve identified that they can make things work for their family at £40k. I’ll show you shortly what an impact this can have on your minimum viable sales level. Success for The Rock Gym can then be built around achieving a lower sales level. Alternatively, they could reinvest those savings into the business on things such as more support in marketing, finance or administration to free up their time to work fewer hours.

You minimum viable sales

Let’s talk about what minimum viable sales actually means. You may have heard people define breakeven sales as the level of sales at which your income equals your costs.

In our definition, breakeven or minimum viable sales, is the level where you get sufficient cash from your business to meet your definition of success. If the costs equal the sales, you’ll have nothing to live off, which is clearly not a smart strategy.

As in our example, previously Dwayne and Jayne’s plan was to achieve a profit of £50k.

They know their overheads are £62,500.

So that means their gross profit needs to be £112,500.

If they have a gross profit percentage of 50% in their gym.

Their annual sales need to be £225,000.

If they’re only open 46 weeks per year, then their ‘breakeven’ or minimum viable weekly sales number is £5,000.

Let’s look at their revised plan with the £40,000 profit figure.

If overheads stay the same at £62,500 then they need a gross profit of £102,500 at a 50% GP percentage.

So their revised annual sales and minimum viable sales figures are £205,000 and £4,500 respectively, which is a 10% reduction in sales.

With a new plan to invest an extra £10k in support with marketing and finance which could result in a lift in gross profit percentage by 2%, Dwayne and Jayne can get by on £4,700 per week as their minimum viable sales, as opposed to their original target of £5,000.

That has got to give them a better lifestyle.

Your SMART Business Plan

Once you’ve worked out your minimum viable sales, it’s time to put some goals together to achieve those new numbers.

Using our example before, Dwayne and Jayne need to set some SMART goals about how to achieve that sales number of £4,700 per week. An example might be to attract 10 new customers per month.

We can then create specific actions to achieve that goal, remembering that each goal and action needs to fit into this SMART format. This forms the basis of your wider plan.

We can assist with creating your Business Plan, please do get in touch if you would like to discuss this further with us.

There are also many other strategies we can look at when redefining success including look at your cashflow, cash conversion cycle. your team and more. If you would like to find out more about these, please do get in touch and we can send you some more information or set up a time to discuss them with you.

Parting thought..

‘Nothing is so contagious as enthusiasm’

Samuel Taylor Coleridge