In 1996, a 20 year old Tiger Woods was named Sports Illustrated‘s sportsman of the year and the PGA Tour Rookie of the Year. In 1997, he won his first Masters with a massive 12 stroke victory at Augusta, becoming the tournament’s youngest ever winner. Then he changed his swing!
He called in Harmon, his coach, and told him that his swing was too reliant on timing. “Anybody can time their swing for a week, but I want to do this for a career,” he said.
Tiger wanted to build a system which would work under the extreme pressures of a world championship. “When the pressure’s on, good mechanics will overcome nervousness. At the same time, the guy who has good mechanics will get less nervous because he knows the other guys will break down first.”
Throughout 1998, Tiger Woods struggled and won only once. Still he stood by the new swing he was learning and practicing. At the Byron Nelson in 1999, Woods famously signalled what was to come with a phone call to Harmon from the range. “I got it,” he said.
Between 2000 and 2002, Woods won 19 times on the PGA Tour, with six majors, including a stretch where he won four majors in a row; the so-called “Tiger Slam.” Golfers today often talk about Woods’ Harmon swing as one of the greatest swings in the history of the game.
There are several ideas in the above story that apply to businesses. Here’re some that stand out:
Critically examine your success
Ask yourself what really has made your business successful. Often, business owners tend to look for reasons for whenever they fail and spend an incredible amount of time identifying the things that the business should not be doing. When things work however, they peg it down to their superb sales/ entrepreneurship/ creative skills. You need to constantly ask yourself what the actual reasons for your success are and how easy they are to replicate.
No business is immune to change. For a business’s long-term survival it is important to take a step back and re-evaluate how you deliver your core product/ service and message.
You can either reach acceptance through the cycle – Denial, Anger, Bargaining, Depression, Acceptance – or simply start there. Accountancy as a profession changed relatively little until the introduction of computers. Now as cloud based finance systems revolutionise the market, the profession is throwing up massive opportunities for those willing to embrace change.
Plan for change
The first step is to recognise the need for constant change. Every year, if not every quarter, set aside at least a few hours to analyse your business and the potential and likelihood for change. One of the oldest and most established tools for doing this is a SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis. Look at what your customers and competitors are saying and doing. Ask your suppliers for input. You’ll be surprised how much competitive information they would have. Go online to research what people are saying about products and services similar to yours. When was the last time you googled for ‘I need a [your product]’?
Create a specific plan of action to implement the change. Remember that people rarely like the the idea of change, so there will always be a lot of pressure to keep things as they are and hope for the best.
Stick to the Plan
Often in every process of change, there is a dip before the really steep climb begins – in profits and in motivation levels. Remember that failure and success are not on two ends of a scale – they are at the same end of the scale – failure is right before success. The successful businesses are those that exhibit ‘grit’ in their pursuit of their goals.
Play for the long term
Pick the top things that you believe have worked for your business since inception, or for the last 20 years. Then list 3 reasons that threaten each of these things not working in the next 3 years. Build your business with the end in mind – robust systems and a good team should be running the business when you are ready to retire/ move on. If you are the majority of the strength that keeps your business alive, you need to rethink your business swing!
Seek Best Practice
Often, business owners are so ingrained in their day-to-day, that they miss out the forest for the trees. The complimentary strategic business review we offer is to help you take a step away and look at your business alongside a business coach to identify areas and strategies where you can start the process of small and massive improvements. Drop us a line and someone from the team will get in touch to schedule this with you. Change your swing, then do it again!
When you talk to your accountant or bookkeeper, do you actually understand what they are telling you? Or are you just assuming they are doing the right thing? An understanding of how money works in business is, of course, a critical part of running a successful enterprise.
While you do not need to have same kind of depth of knowledge that an accountant or a financial analyst might have, you need to ensure you have an awareness of some basic financial concepts. You need to understand what your accountant or bookkeeper is talking about so that you can make sure you are asking them better, more useful questions. If you don’t know what you don’t know, then how can you know what to ask?
You do not need to be able to draw up your accounts, but you do need to be able to understand them. Once you can appreciate how the money flows through your business, you can begin to see which decisions make more sense for your business. A mistake we often see a lot of business owners commit is to look at their bank account statement or their ‘cash based accounts’ as their management reports.
This is a good way to ensure that your business stays alive – but a very bad way to grow and develop your business. The place to start when it comes to finances in the game of business is that there are two ways that numbers can be captured in your business. Those two ways are cash-based and accrual-based.
In the simplest business model you have sales bringing you income, expenses that are costing you money, and the profit, which is the difference between the two. Sales – Expenses = Profit. (We can keep it simple for this and do not need to worry, at this stage, about things like gross profit or net profit.) If you are using cash-based accounting, you only take the income from the expenses once the money has actually changed hands.
In other words, only once you actually get the cash or the money is actually transferred to you, do you consider that sale in your accounts. Equally, only once you have actually paid out the salary to your employees or paid out an invoice, do you account that expense. That is cash-based accounting in a nutshell: based on the actual cash you have. It is what a lot of business owners use when they are first starting out – to keep track of the cash going in and out of the business.
What accrual means is that it is “due”. So while you may not have received the cash just yet, it is due to eventually come and you can still account for it. In this way, you can then make plans for the sale or contract that you have currently just completed. The customer or client may only have to pay you after 30 days or 15 days (and you should have a good system for chasing up your debtors), so the cash is not yet in your account, but the sale has been confirmed, so is being taken into account.
With this form of accounting, you can then have the sale sitting alongside, say, an expense like the rent that will be going out at the end of the month. So you know that that money for the rent has to go out, but you also know that you will be receiving money from a sale by then. You can therefore see the resulting profit and get a better picture of long-term profitability.
Should you be using Cash-Based or Accrual-Based Accounting?
Through business coaching in London we have obviously seen a full range of businesses’ accounts. Every time we see cash-based accounting being done, here’s our advice – change your accountant first and then move to accrual-based accounting. There is a very good reason why accrual based accounting was invented in the first place – to separate out a P&L from a cash flow statement and ensure that the accounts capture the ongoing nature of the business rather than its cash movements.
If you are a very small business and keep your accounts on a sheet of paper or an excel sheet, or you are using partial accrual-based accounting, then cash-based accounting might make sense. However, for any growing or slightly larger business, you really should be doing this accrual-based so that you are producing the most useful numbers for your business. Now, armed with an understanding of all of this, go to your accountant or your bookkeeper and find out – are you doing cash-based or accrual-based accounting?
Next, ask what about VAT – are you on cash VAT or accrual VAT? Why have you chosen that? What happens to your cash flow if you move from one VAT method to another? These are one of those “better” questions to ask.
This combined with your marketing knowledge, your understanding of sales, and augmented with knowledge of other important concepts such as markup and margin, you can start making smarter decisions and more calculated risks that will accelerate your business growth.
As a leader of business, you need to get a good overview of a range of concepts – and there isn’t always time to sift through the reams of information on the web.
Take a risk-free, no-obligation free business coaching session to find out what it’s like to have a business coach helping you watch your plays. Click here to request a free coaching call.