Business Coaches can be great. I’ve used them on several occasions. Coaches will address your business issues and make suggestions for how to improve. This tool will give you some of the business coaching feedback and links to potential solutions virtually. While I wouldn’t say that our virtual business coaching tools will replace a business coach, they will have your a great place to start.
Virtual Business Coach Method
Since I’m not sitting in a room with you or your finances trying to answer specific questions, I made a basic business diagnostics tool. The tool will look for some of the most common business issues in your month to month profits. It is surprising what you can tell about a business from just this little bit of information.Basic Business Diagnostics
This diagnostic tool was developed in order to identify areas of opportunity for you as a business decision maker. It considers 8 different diagnostic methods and has suggestions for how to address 26 potential outcomes of these methods. We don’t cover all 26 scenarios here. The tool will do that. But we do link to some resources for each topic.
We’re looking for indicators of four scenarios here. None of these buckets are prescriptive, so you may identify with a bucket that the tool doesn’t necessarily put you into based on the description. You’ll have to do some of your own critical thinking here, but I’ll try to give you some options and business coaching virtually.
High Profit Variability
Business variation isn’t just annoying, it’s a sign that something in your overall business system is not working as well as it could be. We wrote an eBook just to address this topic:
How to Turn Business Variation into Profits <Link>
Highly variable profits are probably the most common outcome of all business diagnostics. It is also the category we’ll be looking at several more times in this diagnostics tool.
Chances are if your profit variability is high, then your take-home pay is also suffering from quite a bit of variability. You might benefit from the model we developed to pay yourself a consistent salary as a business owner.
If your business is losing money on a regular basis, then use the Drop Dead Date calculator <link> to understand how long your current cash will keep your business afloat. If you are in the startup phase, you may want to read blogs in our startup guide category. If you are not in the startup phase and are losing money, then I suggest you look at How to Pivot Your Business.
A general goal is for all business owners to be on some base salary with bonuses rather than just taking home whatever is left at the end of the month. If you are seeing low profits I suggest a renewed focus on profitability and sales. Consider using a sales-funnel and increasing your marketing budget.
The level of “good” is quite subjective. In the tool, this just means you’re making more than the US national average for business owners.
Are You In Control of Your Business?
Control charts are one of the most powerful tools for business owners to keep an eye on their businesses. I suggest using a control chart to track the performance of every major account after your Monthly Close. In this case, we’re just looking at the overall profit because it’s a great place to start.
The tool looks at absolute profitability and swings in profitability. If you see a data point outside of the yellow lines, then there is only a 5% chance that it wasn’t caused by something. If it’s outside the red lines, then there’s only a 0.3% chance it wasn’t caused by something. The sample below shows that February was a strange month and then the return to normal profits in March showed up as a large profit swing.
Any data which shows up as statistically abnormal should be able to explainable. Every bump in the road should be from an activity that you did, whether it’s a marketing program or a cost savings initiative.
In fact, if you launch a marketing program and you don’t see a bump in sales show up on your control charts for revenue of that product, I’d be questioning the effectiveness of that campaign.
After looking at your last 12 months, your business coach would consider any longer-term trends occurring in your business. The goal is to identify the source of some of the trends and highlight areas of the business that need special attention in those scenarios.
If your business is shrinking, then there is a good chance that there are still some profitable portions of the business while there may be other portions which are not profitable. At this point, since this is a trend over 3 years, it is time to cut the unprofitable parts of the business and focus on what parts of your business add a lot of value to your customers or to a new customer group. You can use our How to Pivot tool.
If your business is cruising along within 5% of where it was 3 years ago you have the advantage of stability. If that’s what you want, great. But if that’s not what you want you can work on turning business variation into profits, gaining more value with value-based pricing, or working on your overall product strategy.
Business growth is a great thing, but it comes with its own set of problems. Most notably, getting the Cash Flow to fund growth tends to be quite a bit more difficult than most business owners expect. If you’re growing, we suggest that you pay close attention to The 3 Most Important Financial KPIs to Manage your Cash Flow.
If your business is seasonal, that is not a bad thing, but it is something you should be planning for. Seasonality should feed into your overall marketing strategy. If you want to even out your sales, then you should be planning marketing activities which correspond to slow seasons. If you want to take advantage of seasonality, then you should be considering the return on marketing investment for each marketing program based on the season that it was launched. You may find that your return on investment is much higher in a specific season.
Consulting – A Real Live Business Coach
Business Coaching services are always on the table. If you are interested in having a business coach, please send me a personal note to discuss your interest in coaching and review the consulting page.