go-for-it

So, how can you stay fresh, keep the momentum going and make sure your business is on track? Try these ten tips for some extra added OOMPH!

Tip 1 – You probably enjoy the creative work you produce, but do you really know if it’s profitable? Take an in-depth look at each project for the last three months to see if it actually made a profit. Make sure you take into account each and every cost that should be allocated. It’s tempting, but don’t shy away from this exercise – it will help you move forward in a profitable way.

Tip 2 – Using the results from above, what have you learned? What are you doing well and need to do more of? What do you need to stop doing because it’s costing you money? Make a decision to stop doing work like this immediately and to take on only profitable projects.

Tip 3 – Put together a forecast for the year ahead. For your first draft forecast, take the turnover from your previous year and increase this by, say 20% (as a starting point). Then, start with the big costs in your agency, usually staff and premises costs. Add all the other costs for the year. Once you have done this, do you have a forecast profit for the year? If not, you need to increase the turnover and/or reduce costs.

Tip 4 – Now you have a draft forecast down, have a think about what you as a business owner, want to achieve, both now and in the future. How can your business work better for you so that you can enjoy the things you want to? Will you need additional profits from the company? If so, the turnover forecast needs to be tweaked to cover your requirements.

Tip 5 – Benchmarking exercises are really useful to measure your performance against that of your competitors, by sector and location. Some accountants have access to a database and can prepare this for you. Alternatively, some creative membership organisations publish annual survey results. Benchmarking will identify your strengths and weaknesses.

Tip 6 – Keep on top of the cash. Even profitable companies can quickly go out of business due to poor cash flow. Issuing correct and timely sales invoices is an absolute must. Ensure that your terms of business clearly state that invoices are payable immediately. It sounds obvious, but make sure that your bank details are shown on your invoices. In fact, you may wish to accept payment by BACS only. Chase up any late payments promptly.

Tip 7 – Further cash flow. Make sure you set aside in a deposit account a proportion of your receipts for tax and VAT. It makes good business sense and means you won’t spend the money that legally does not belong to you.

Tip 8 – Keep on top of the finances – regularly. Ensure you look at these reports every week – bank balance and activity, accounts receivable and accounts payable.

Tip 9 – Keep on top of the finances – monthly. Review your performance at the month end. Record what worked well for you and make changes to improve the things that haven’t worked so well. If your profit for the month is below forecast, how are you going to make up the shortfall?

Tip 10 – Develop a performance improvement plan – an action plan setting out precisely what you are going to do to improve your performance. This will encompass the pitch process, marketing, getting the best from your team and, of course, the finances.

Have you found these tips useful? Contact us if you need some help to improve profitability in your creative agency, by email at info@danielsaccountancy.com or call us on 07970 314907. We will be delighted to help.

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