As a small business owner, you often wear many hats at once—marketer, salesperson, human resources, legal counsel, business strategist...the list goes on. Between managing your employees and developing business strategies, it's easy to lose track of expenses.
Failing to keep a close eye on your finances, however, can negatively impact your bottom line. In fact, 82 percent of businesses fail because of cash flow problems. To avoid the fate of many small business owners before you, it’s important to conduct a comprehensive mid-year expense checkup. In doing so, you can trim back the fat and focus on in new goals, services and efforts. Use the strategies below to help guide you through your mid-year expense checkup and go into the second half feeling ready to succeed.
1. Improve Pricing for Better Profit
You make money from your customers, but you spend money to get and keep them, between marketing costs and employee labor. One way to reduce how much you spend to get and keep customers is to implement a tiered pricing model.
According to Churn Buster’s guide, How Smart Pricing Tiers Improve Retention, a tiered pricing model, when designed correctly, allows you to naturally upsell to customers while simultaneously building retention. They explain:
“Product tiers are a huge key to long-term customer retention and success. But, they have to be designed to provide value first. When that’s the case, upsells happen more naturally, with a lot less friction.”
How do you provide the most value? Help every level of customer succeed with your product or service: “If every customer feels like they can succeed with your product, from the lowest end to the highest, they’re far more likely to stay with you as they scale. If you nickel and dime them from day one, they’re likely to go looking for another option instead of growing and upgrading within your product,” explains Churn Buster.
2. Assess Monthly Payments
It’s important to take a look at the current suite of products and services you use to make sure you’re getting the best bang for your buck. It’s common to sign up for a service then never check back to see if there is a better deal or package for your changing needs and budget.
During your expense check-up, make a list of all the services and products you currently pay for. Divide the list into two: need and don’t need. For those that you don’t need, but would like to keep, call for better pricing. Companies don’t want customers to cancel, so they may offer a deal to keep you on board.
For those you do need, consider how you can get more value from them. Are there new features that would be helpful? Are there other upgrades you’ve missed?
Follow this process for vendors and contract employees as well. Who’s still necessary and who was only providing value for one specific project? Use this time to trim back where possible so you can run a lean business into the end of the year.
3. Evaluate Revenue and Sales Goals
Revisit and evaluate the revenue and sales goals you set at the beginning of the year. Are you on target to reach them or falling way behind? If you’re on target, the next step is to ask yourself: How can we do more of this? What’s working and what can be repeated? What potential obstacles do we see?
If not, now’s the time to create more effective goals for the second half of the year. When doing so, Hubspot’s 8 Steps to Setting Smarter Sales Goals suggests that you take the following steps:
- Calculate monthly sales goals, which should align with annual goals.
- Set waterfall goals. I.E. 50 sales in September, 60 sales in October, so on and so forth.
- Sequence, or prioritize your goals by what will provide the most business value.
- Set activity goals, not just financial.
- Incentivize those who reach their goals and build this into your plan.
- Monitor goal progression.
- Set stretch, or hard to reach, goals.
- Look toward mentors to help employees meet those goals.
This quick sales goals check-in allows you to start the second half of the year stronger, more realistic, and prepared to end on a high note. It also keeps your team motivated and reminded about what everyone is working toward.
Now’s the Time for Your Mid-Year Expense Check-Up
Mid-year expense checkups can be a lot of work and a major headache for small business owners who are strapped for time and resources. Using an online system like Xero and WorkflowMax will make the entire process a whole lot easier. You’ll get real-time visibility over your financials, and powerful reporting capability to understand where your money is actually going.
Check out Xero Expenses too - available for all Xero Standard or Premium Business edition subscriptions. You'll be able to easily capture receipts and submit claims online or from your phone.
Making sure you get on top of it sooner rather than later, will ensure that you business’s financial health is in good standing and allow you to go into the second half of the year stronger and better prepared. Use the strategies above to help guide your mid-year expense checkup and get back on track for a profitable year.