The O’Connor Group has worked with all kinds of businesses in our seventeen years of assisting clients, and we have helped them learn many things along the way.  Here are the top ten things we think all businesses should know:

10. 90/10 is the new 80/20. While the standard theory in business is that 80% of the profits come from 20% of customers, over the years we have seen this shift closer to 90/10. Take a look at 20% of your best customers, and you might see a sizable gap between the top 10% and the bottom 10%. Focus on those customers that are truly bringing you a return on investment.

9. Companies need to review capital expenditures before AND after the fact. When management decides to make major purchases,  open a new office, or purchase real estate, it does so (hopefully) after a cost/benefit analysis. Unfortunately, many companies fail to test the actual results against the original assumptions. Investments that do not pan out decrease profitability and current cash flow, in ways that are only quantifiable after major purchases have been made.

8. Growth is not always what it’s cracked up to be.  It’s in our nature to see growth as good, and this is often a goal for business. However, when not properly managed, it can be detrimental. Some companies performing well with a $30 million revenue base will struggle when revenue increases to $32 million. Growth stresses the competencies of management, suppliers, and employees in unanticipated ways.

7. The best time to borrow money is when there is no need for it. Debt should not fund losses. When the business cycle slows, many companies immediately turn to their lender. Most are better served managing their (free) working capital better to reduce or eliminate funding needs.

6. Cash is still king. Cash is the lifeblood of any business, and should be projected and updated constantly. Short-term (13-week) cash flow forecasts are important, and when done consistently, illuminate the true drivers of profitability.

5. Your balance sheet and cash flow are  as important as your P&L. Most companies spend time and effort projecting their P&L, but the balance sheet and cash flow are often an afterthought. A company’s performance needs to be measured after considering all three.

4. Convert data to information. Information systems today are so powerful that even the smallest businesses can collect incredible amounts of data on its customers and products.

3. Not all customers are created equal. Customers can usually be divided into three groups (A, B or C) based on profitability/risk. Efforts should be made to retain “A” customers at that level, convert “B” customers to “A”, and to upgrade “C” customers through actions such as better pricing. Level “C” customers should not remain there long.

2. Management cannot afford to fall in love with any particular, product, market, or location. It needs to evaluate all decisions tactically and strategically to determine how they will impact the business.

1. Perform an annual SWOT analysis. Know your strengths weaknesses, opportunities and threats. Get up to speed on your current competitors and your core markets. This knowledge will forge a path to creation of a sound business plan and marketing strategy.

For more information about how The O’Connor Group can lay the foundation for your company’s future success, please contact us at 1-888-9-BIZ-FIX or email us at info@theoconnorgroup.com.

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