Someone asked me the other day -
"What would you do if you wanted to grow your business?"
In the hope that what I might suggest would be something they could use for themselves. If only growing your business was so simple.
The truth is, I could recommend any number of techniques to grow your business, but it won't grow unless you project your numbers into the future.
Let me repeat that -
Your business will not grow unless you project your numbers into the future.
You might be thinking “Shaun, that’s a little harsh. If I work really hard and reinvest the profits, my business will definitely grow.”
And you’re right. It might grow... if you make the right guesses and happen to spin a good wheel of fortune.
The truth is unless you have an infinite pot of money, you have to predict the future if you want to grow your business. It’s the only way to make important decisions because otherwise, it’s just guesswork.
Right now, could you accurately guess -
- What your business’s operational requirements (such as staff, occupancy and materials) are going to be in 3-6 months? What about 12?
- What and when you’ll need to spend money on to invest into your business (such as equipment, trademarks and infrastructure)?
Most businesses I speak to haven’t thought about those questions or are making decisions based on what’s in their bank account. This is actually quite common and nothing to be ashamed of.
It’s why having a future-focused accountant is so important to you as a business owner, who wants to grow your business.
When we first started working with Tathra Place, their decisions were made based on their bank account balance.
If there was spare money in the bank, Luke would spend it at the local Rural Store on the project he felt needed to be done first. Whether that was fencing or chicken tractors, he’d buy what he needed then build it all himself… while trying to run his farm and raise a young family.
If your business is in its early start-up phase, this is actually the best way to run lean and make sure your business is viable. But beyond 12 months and the expansion of your main sales channel, it can start to be a hindrance.
This was the case for Tathra Place.
Luke quickly found out that one person can’t:
- Feed thousands of animals daily with manual labour;
- Build never-ending infrastructure;
- Maintain a farm; and
- Deliver stock each week.
And they definitely can’t do it with only one week’s bank balance.
There’s no doubt Luke had a vision for the future - he will describe it for you in detail if you ask him. But he isn’t a numbers guy, so he couldn’t tell you how fast that vision could be developed and how much funding was required to do it.
This is a problem faced by many entrepreneurs who want to grow their business.
How do you grow your business when it has many moving parts?
- You visualise your business numbers so they tell the real story of what’s happening inside your business.
- Then, you project those numbers forward so you can account for new projects and growth.
As an accountant, this is the simplest part of my job so in my mind, this makes complete sense. But a lot of business owners don’t think like I do nor are they trained as I am.
So in today’s post, I’m going to breakdown the two concepts that are stopping you from growing your food & beverage business.
Numbers vs Money
Numbers and money are two very different concepts but most people bundle them together. It’s actually easier to divorce the two completely and focus entirely on the numbers of your business.
Because money can be a great procrastinator.
I bet you’re like our clients -
Your operational numbers make complete sense to you, but money or $ figures give you headaches. You procrastinate dealing with them and then finally abandon them because they’re too difficult to understand.
You’re not alone in feeling this way.
Here’s how I taught Luke from Tathra Place to think about his business numbers
First, start with the raw numbers -
- How many products can you produce?
- How much machinery do you need?
- How many product variations are desirable?
- How many people do you need?
These numbers are the foundation of your business forecast.You should be able to quote these any day of the week.
Next, you need to price each aspect of the operations -
- How much can we sell x product for?
- What will a casual staff member cost?
- How many hours do we need them a week?
Then the end result is a dollar figure, which helps you to create a model in your head about what areas of your business affect the others.
For example, if you own a farm like Tathra Place, you could look at what a 3-year fixed price contract on duck feed could do for your business. Removing the relationship between feed costs and increases in sales may well give you the confidence to invest in a wholesale duck model.
So now you have your business numbers, what do you do with them?
Visualise your business numbers to make sense of them
Rather than coming back to our client’s with a forecast for their business, we like to involve them in the process of understanding their numbers because -
- It helps you make better business decisions immediately;
- It removes your fear associated with looking at your business numbers;
- It allows us to work together to make sense of the entire business; and
- It helps us all to focus on helping you grow your business.
But if I show up with a page full of numbers, most clients immediately grasp their forehead with a pained expression on their face.
Over the last 16 years of owning and running businesses, the part that makes me most anxious is worrying about the finances. - Luke, Tathra Place
This is actually quite common and can be easily explained with basic neuroscience.
Different brains work in different ways.
As an accountant, there’s nothing I like more than staring at a page of numbers. But most entrepreneurs brains don’t work in quite the same way as mine does. In fact, a lot of people’s brains don’t work like an accountant does.
Several studies have shown that 65% of people are visual learners, which just goes to show why visualising your business data is more likely to lead to better decision making on your part.
Rather than worry my clients with something they can’t understand, I circumnavigate that feeling of terror by visualising my client’s business numbers into an interactive graph.
The graphs we develop make it possible to add or remove variables (like the relationship between feed costs and an increase in sales) and show the potential profit from a venture as well as how much money will be in the bank.
It's going to help you grow your business.
Out of all the work I do, this is my favourite because when I show our clients a visual graph, everything clicks into place for them. We can literally see whether a project is possible and how long it will take to achieve.
While I was working with Tathra Place, we realised that all of his decisions came down to one question I asked him -
Luke, how many ducks can you sell?
Retail vs Wholesale
If you’re on this blog, chances are you’re an Australian food & beverage business. You may even be a producer, like Luke, which is why you’ll understand how difficult it is to choose between retail and wholesale.
Retail is tempting
You can focus all your energy and resources on higher margin retail sales. In fact, this often seems like the most natural choice from a revenue per product perspective.
But a retail shop comes at a cost. Namely, the cost of staffing, rent and more importantly, finding customers for each location. It’s not an easy route.
This was a question we tackled with Tathra Place.
Rather than only making a decision based on the revenue Luke stood to make, we zoomed out to consider the numbers of the duck industry. It’s a growing market, but unbelievably most of the duck produced in Australia is -
- Not free-range; and
- Is treated with chemicals.
Lukes aren’t and that’s what makes his ducks so special.
But Luke faced a challenge. He needed to build a free-range system where ducks could survive all year round so that he could fulfill a wholesale contract.
That’s where the fun part comes in.
What’s involved in wholesale?
In order to make this decision, we needed to discuss all the numbers, not just how much Luke could stand to make. This included -
- New machinery to help lighten Luke’s responsibilities;
- 2 full-time labourers;
- 1 full-time farm manager; and
- Enough fencing gear to create 12 new paddocks.
Having never had wages to worry about before, this was a huge step for Tathra Place and Luke. It required a lot of confidence in the business numbers and Luke’s selling targets to move ahead.
By visualising the farm’s current data and the potential future of the company, we were able to create a forecast and reverse-engineer the numbers.
Reverse-engineering the numbers meant we could tell Luke precisely how many ducks he needed to sell per week to break even, let alone make profit.
Giving him one number - how many ducks he has to sell - meant that covering wages, machine funding and fencing was simple to grasp.
One number, one goal.
That’s how we help our client Tathra Place grow and it's how we can help you grow your business.
By separating the numbers from money, we’re able to tell an effective business story. One that tells you, as the business owner, what you need to do… not how much money you need.
- Forget money in the bank.
- Forget juggling multiple numbers and confusing equations.
One number, one goal.
If we can help you see your business and its numbers in a new way, you can focus on hitting your targets, achieving your business goals and growing your business.
So, if you -
- Know that dealing with money is the reason you procrastinate;
- Only feel okay because there’s enough cash each month to pay last month’s credit card bill; or
- Are selling as much as possible through any sales channel without knowing how much you need to sell to achieve your business goals;
This is what I do for my clients, day in and day out, and it’s what I love.
Plus, the impact of a future-focused accountant can change the course of any Australian food & beverage business, like Tathra Place -
This is why we choose to be the Australian food & beverage industry accountant.