“The only real mistake is the one from which we learn nothing.” (Henry Ford)

Without revenue targets, businesses are unable to measure their performance against past years, reward employees, or accurately forecast and plan. Targets set by leaders for individuals or teams can shape morale and expectations for employees and bring accountability to team actions.

But it doesn’t always work like this. You might have found yourself in the unenviable position where your targets are consistently being missed – despite your team leaders reporting that their teams are giving it everything they’ve got. Here are four reasons why this may be happening – and what you can do about it.

Reason 1: You set the wrong goals

For many leaders, revenue targets are calculated by simply adding a percentage to the previous year’s turnover to show growth. While this system may seem sensible, it’s actually very wrong.

When setting revenue targets, you must consider a number of factors that go beyond the achievements of the previous year (or quarter), and the current inflationary environment. Consumer behaviours change; sometimes overnight. The market adjusts and new competitors are always springing up. What’s more, a new technology could arise, bringing new challenges or rendering one of your products or services obsolete.

The first step to setting accurate revenue targets is gathering all the data. Once you’ve done a thorough analysis of the market, competition, and consumer behaviour, you should look at each product or service you offer and evaluate its existing sales and potential for new sales. Setting individual targets should result in much more realistic numbers.

Reason 2: Short-term thinking

Pressure to show growth can cause you to rely too much on channels that deliver speedy growth. It’s easy to fall into the trap of doing things for short-term benefit, rather than building your business one brick at a time. Loads of things that are time-consuming and have no obvious short-term gain could eventually reap huge rewards – things like building an organic online presence or nurturing a business community.

The demand for short-term growth can also lead you to abandon strategies that do work simply because they don’t show immediate success. There’s almost always a lag between implementing a new strategy and seeing an impact on your bottom line – often a little patience is all it takes.

Reason 3: Failing to plan

Having a revenue target is not the same as having a plan. At the end of the day, it’s your staff who will convert the proposed numbers into a reality. Your teams must be given the tools they need to meet your revenue targets.

Have your numbers factored in a new competitor? Then your staff need to know how to market around that new competitor, and your sales teams need to know how to answer the questions they’re going to get about the competitor’s products.

If it’s growth you’re after, will your current team be able to handle the extra hours needed to achieve it? Or do you need to add staff? If you need new staff, have you allocated budget for hiring and training them? And have you considered that they’ll operate at a slower pace in the beginning?

Your accountant (that’s us!) can help you gather the necessary data to turn your sales targets into an actionable, budget-friendly plan that makes them a reality.

Reason 4: Bad sales pipeline

You can only sell to customers who actually need your product. You can kiss your revenue targets goodbye if your sales team isn’t getting enough good leads. Without good leads, salespeople start changing their behaviour, wasting time trying to sell to clients they know won’t bite and/or giving deep discounts just to get a hit.

Poor-quality sales pipelines manifest themselves through deals that either don’t close or that take a long time to close. If this is something you’re seeing regularly, here are three questions to ask yourself:

1. Is your marketing targeting the right demographics?
2. If you are reaching the right demographics, do you have a large enough budget to reach the number of clients you need?
3. Are your leads being assessed for quality, and if so, are the sales reps getting the highest quality leads first?

Remember, revenue targets are most often reached by those companies that have gathered accurate data and planned effectively to reach those goals. Your accountant should be on speed dial when you’re putting together revenue targets (and coming up with plans to make them work).

We’d love to chat about your revenue targets – just give us a ring. 

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact us for specific and detailed advice.

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“Always treat your employees exactly as you want them to treat your best customers.” (Stephen R. Covey, author of ‘7 Habits of Highly Effective People’)

Good business leaders recognise that regular employee performance reviews play a vital role in improving transparency, identifying talent, and enhancing performance – yet often this process is handled in a casual fashion or even not implemented at all. In fact, a recent study revealed that only 13% of employees and managers, and only 6% of CEOs, think their organisation’s performance appraisal system is useful. Even worse, 88% of respondents said their current performance review negatively impacted their opinion of the HR department.

Here are six tips for turning those opinions around and getting maximum value from your performance reviews.

Tip 1: Really listen

During a review it’s vital that the employee feels truly understood. Data shows that leaders who come to reviews with preconceived notions and a list of complaints are more likely to have unhappy teams. A massive 85% of employees would consider quitting if they thought their review to be unfair – and there is no surer way of making someone feel unfairly treated than to brush off their side of the story and make them feel unheard.

Companies should therefore focus on getting their leaders to:

• actively listen to employees during reviews
• avoid making assumptions
• ignore distractions such as phone calls
• pay attention to verbal and nonverbal cues.

Tip 2: Be transparent

Because performance reviews are often linked to raises and other benefits, it’s extremely important that the employee understands exactly why certain decisions were made. Giving clear, fair, specific and actionable feedback allows the employee to see how they can get a better raise next year and what they need to do to gain a promotion. Vague or unclear feedback only leads to distrust of the system – and of the company’s HR and leadership.

Tip 3: Keep looking forward

While the very name “performance review” suggests a look back over the course of the past year, it’s also the ideal time to project forward into the future. By using the review to set new goals and speak about career progression, your leaders will be able to motivate employees to do well. Knowing that you’re being considered for promotions or that there are rewards at the end of the tunnel is motivational. Little wonder, then, that forward-looking performance reviews have been shown to improve employee productivity by 13%.

Tip 4: Your employee’s opinion matters

A decent performance review is a conversation between employer and employee. It is a chance to listen as well as to speak, and this dynamic should be carried through to the very design of the review. Speak with both managers and employees about the reviews. Ask them what works and what doesn’t and encourage them to suggest things that would make the process more useful. Then actually adjust the review to accommodate these requests where possible. Employees who feel they have power and buy-in over the review process are far less likely to feel hard done by.

Tip 5: Little and often

According to many business experts, traditional annual business reviews are inadequate. Doing them once a year leaves you with too much ground to cover and places undue stress on the employee – who is then less likely to function optimally during the review. In fact, a recent study suggested the pressure can be so bad that 34% of millennials admitted to crying during their performance review.

By having more frequent and casual performance chats, and addressing any issues when they arise, companies can reduce stress and get better results. According to a report by ClearCompany, employees at companies that use continuous feedback systems are 65% more motivated and 66% more productive.

Tip 6: Be prepared

At the end of the day, an employee performance review is about reward and improvement. Before going into a review, it’s important to know exactly what rewards you’re able to offer, and how these can be implemented.

Work with your team to create a system that is not only motivational, but effective. And speak to your accountant (that’s us) about defining what you can put on the table.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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“Beware of little expenses; a small leak will sink a great ship.” (Benjamin Franklin)

When a company is struggling with cashflow, or simply looking to improve profitability, the directors will often consider making grand sweeping changes like retrenching staff, slashing the marketing budget or even selling off resources. While this kind of kneejerk reaction can provide instant gratification, it may not be the solution to your long-term struggles. Cutting back on marketing might impact future sales, for example, and end up making things even worse.

That’s why it’s often a good idea to eliminate small expenses and wasteful expenditures, when you’re looking to streamline cash flow. Here are five simple ways to save money that you may not have considered.

1. Beware bank charges

How did your company open its first bank account? Why did you choose that particular bank? If you haven’t thought about these things in a while, now’s a good time to start. The first step would be comparing bank charges – how much are you being charged to transact, and could you be paying less? Your accountant can help you to break down your company’s needs and find the best solution. Do you need to transact every day, or can you save money by paying off your creditors in scheduled payment runs? Would bundled services work better than transacting at will? How many credit cards do you need? Do you use overdraft facilities? The bottom line: stop paying for services you don’t need.

2. Trim the tech costs

Technology is essential for running a business, but do you need (or even use) everything you currently have? Costs such as software subscriptions, fibre lines and cell phone contracts should all be looked at closely. Do you need a 200Mb/s download or will a 50Mb/s work just as well? Which of your employees really uses their company phones to generate profit? Small businesses will even benefit from looking at their software licences. Many popular work solutions have free, open-source counterparts that work very well and don’t require a monthly payment. Even if you decide you do need to pay for licences, you might be able to cut down on the number of licences.

3. Exercise office efficiency

Monthly utilities may seem like something you can’t go without, but it might be wise to reconsider. Have a look at your work arrangement. Could you operate a shared desk situation for hybrid workers? Have you considered installing flow restriction nozzles on bathroom taps, and LED bulbs in the light fittings? Reducing the size of your office space and then maximising the savings attained on the utilities can save thousands each month – money that could be spent on attracting new clients.

4. Commit to your favourite vendors

In business, commitment can be a cost-saving. If you have regular suppliers you’re happy with, why not speak to them about longer-term arrangements for cheaper monthly charges? Small business owners are particularly guilty of accepting supplier prices without considering the various ways these can be negotiated. Some of your suppliers might place great value on a one-year contract as opposed to a month-by-month one. Or they may be prepared to throw in free services in exchange for your guaranteed monthly spend. Ask your accountant to take a look at your current supplier arrangements and suggest alternatives and/or ways to reduce costs. It could have a significant impact.

5. Adjust your payment and collection terms

Most big companies have their invoice payment and collection systems down to a fine art – but smaller businesses may not even think about them. Making sure that your creditors settle their invoices long before you need to make payments yourself allows you to benefit from the interest of having money in your account. It also ensures you never have to pay fines for missed payments or become overdrawn. As your accountants, we can help to streamline your payment and collection terms, and potentially achieve some significant savings.

The bottom line

Making cost savings doesn’t need to mean losing clients, products or expertise. And the hacks above are just the tip of the iceberg – there are loads of other small ways to save money. Speak to us about taking the small steps to greater profitability.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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“There are no shortcuts when it comes to getting out of debt.” (Dave Ramsey, finance journalist and author)

Most businesses have debt of some kind or another. Whether you need help to buy stock, maintain equipment or even fund a property, it’s likely that at some stage in your business’ life you will need to take out loans. The challenge comes in balancing the needs of your business with the debt you’ve taken on in a way that ensures growth. Here are our five tips for managing debt in your startup.

1. Understand your debt

In order to successfully manage debt, you first need to fully understand it. As your accountants, we can help you create a complete spreadsheet of your debts detailing everything from the amounts owed, to interest rates, repayment schedules, and even penalties that may be triggered by late payments. This information will be critical for making the right choices.

2. N is for negotiate

Provided you have a good relationship with your lenders, your next step should be to try to renegotiate all your loans. Asking for lower interest rates, extended repayment terms or consolidation of debts could make the whole process of debt repayment simpler.

3. Not all debts are created equal

With your debts now in their healthiest place, it’s important to recognise that some debts are more important than others and thus need to be paid off first. Generally, you should aim to pay off high-interest loans first as these will cost you the most in the long run. Next you need to cover any debts which are secured by collateral – this will stop you from losing your assets in the future. Tax debts should also be prioritised as these can come with severe penalties and even criminal prosecution.

Sometimes the choices are not immediately obvious, so don’t be afraid to ask us for a debt repayment schedule which factors in your business’ operating conditions, cashflow and ultimate goals.

4. Improve cash flow

If you want to make sure your debt never becomes a problem, it’s vital that you improve the cash flow in your business to the point where you can meet your obligations. This can happen either through increasing sales, decreasing costs, or optimising operations – or from a combination of all three. For example, any money you can save on unnecessary expenses can go towards repaying your debt, lowering your interest payments and ultimately increasing the likelihood of success. It’s therefore essential that you work with us, your accountants, to optimise your inventory, cut costs, improve sales opportunities and chase your debtors and invoices to ensure prompt payment.

5. Monitor your debt carefully

Your repayment schedule should not be set in stone. It needs to be reviewed and adjusted regularly to account for any changes in your business condition. The goal here is not to be entirely free of debt, but rather to leverage debt for improved business growth. Managing debt is an ongoing process that could very likely last for the entire lifespan of your company.

The bottom line

Debt can be the leg-up your business needs – or the lead weight that holds it back. Speak to us to make sure it’s the former.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

© CA(SA)DotNews