How to Fulfil Your Small Business Potential
As a starting point when budgeting and setting targets, I always ask my clients
- Do you know the true potential of your business?
- Do you know what revenue you could achieve if you were firing on all cylinders and you had a backlog of client work to be getting on with?
If the answer is yes, then good on you! You have now got a target to achieve and this number allows you to track when you are at capacity and need to hire more staff/get more subcontracted resources.
However, if you are not too sure then follow this simple formula to calculate the true potential of the agency:
STAFF NAME * CHARGE OUT RATE PER HOUR * HOURS WORKED PER MONTH
Do this for all staff and add up the numbers. Before you get too excited, you need to take off 20-30% for ad hoc, admin time and lunch breaks etc. You can then allow for holiday allowance and any study time (or any capacity reducing time).
*TOP TIP* Don’t get too clever with this. Follow the KISS principle (Keep It Simple Stupid)!
Once you have a monthly revenue target compare it with what your last three months’ average revenue was. If you are well below you need to look at where the problem comes from:
- Do you have lots of work coming in? (A strong pipeline) but you are over servicing the client?
- Are you working more hours than you budgeted for in order to please the client?
- Are you missing leads and converted sales?
- Are your staff sitting idle?
The answer must be either 1) or 2)
Hopefully, this has set you on a road to better understanding the potential of your agency. The critical thing is to identify if the issue is 1, 2 or both. Get the team together and set some clear actions to work on over the next month to improve. Then come back and measure the impact. Be patient. Small changes can take a long time to work and require persistence and dedication.
Read How Small Business Owners Can Think More Strategically to further fulfil your small business potential.
Growing your business is not an easy task, book a free strategy session with a senior GrowFactor Chartered Accountant. No strings attached.
Thank you for reading! Please leave any feedback and comments below.