The Business Advisory Blog

The Business Advisory Blog

Insight, news and updates from Alliott NZ Chartered Accountants, Auckland New Zealand. The views expressed here are the views of the author and should be discussed in further detail should an article be relevant to your individual circumstances.

While every effort has been made to provide valuable, useful information in this publication, this firm and any related suppliers or associated companies accept no responsibility or any form of liability from reliance upon or use of its contents. Any suggestions should be considered carefully within your own particular circumstances, as they are intended as general information only.

Greg Millar
Published on

We thought it would be fun to put ourselves in the shoes of our firm’s clients

So we put our minds to some questions that you might like to ask us next time you see us.

check tick-277A discussion around one or more of these areas could be very beneficial to you in helping you make more informed management decisions in your business. So, here we go with the four questions:

1. What is my breakeven point?

This refers to the level of sales required to fully cover general business overhead and as such, it is the point where you start to move into profit.

Depending on your business, you might break this down to monthly breakeven, or even weekly or daily.

It is not as simple as it might seem, since some costs vary with sales volume, whereas others are fixed. The team at Alliotts will be able to analyse your cost structure and let you know the level of sales required to break even. Depending on your business, if your average transaction value is predictable, you will even be able to break this down further into units required to be sold.

If you don’t know these numbers, be sure to ask us to do some work on it for you.

2. What drives my revenue?

If you ever think that you need to increase sales, do you know where to start?

What are the key drivers of your revenue? In many businesses, revenue can be broken down to number of customers x transaction frequency x average transaction value. It may or may not be that for you. Ask us where you should be focused. It could be in one or more of the following areas:

  • Retaining existing customers
  • Generating new leads or enquiries
  • Converting leads to new customers (or new jobs)
  • Getting customers to buy from you more frequently
  • Analysing your pricing
  • Looking at ways to sell more every transaction

There could be a variety of strategies to look at here. Let's pick on one for the benefit of this discussion – pricing.

It’s our experience that too many businesses have very little knowledge about the impact of pricing on their sales. Many businesses offer discounts to people who don’t even ask for them, for example. On the other side of the coin, business owners make assumptions about increasing prices that often lead to them leaving money on the table.

Ask us, "At my level of gross profit margin, if I increase my prices by 20%, how many of my customers could I afford to lose before I am any worse off?" The number might surprise you – and help you with your pricing strategy.

3. Are my financial results good, bad or indifferent?

Alliotts have a process to take you through an analysis of your financial performance each year, pointing out key ratios such as gross profit percentage, days locked up in receivables and inventory and others.

But the question to ask is, is that good, bad or somewhere in the middle?

Who knows, for example, if a gross profit of 42% is where you should be? Ask us what the trends are like – is the number increasing or declining, or steady? And depending on the response, what is our insight as to why that might be happening.

Equally as importantly, enquire about benchmark data. Comparative data by industry is becoming more readily available for comparing your business to the ‘norm'. You can then have a quality discussion with us about what action you might take to fix your weaknesses and, more importantly, build on your strengths.

4. What are your most successful clients doing?

As you would expect, we work with many business clients. Some are very successful; some doing OK; others, of course, struggling. So why not ask us what their observations are on what their top 10 clients are doing to make them successful? It is a great question to ask, and if you pick up just one idea that you could implement in your business to improve your results or take you to still another level, it is worthwhile.

The accountant is cited in all of the surveys as the most trusted business advisor. Make sure you are making the most of the relationship you have with Alliotts. Accountants are always reminded to ask more questions. We encourage business owners to do the same.

It’s our hope that a double-pronged approach will have a dramatic impact, not just on your business but on the business economy as a whole. Call Alliotts in Auckland on 09 520 9200 to find out more.

Thanks, too, to Colin Dunn at Panalitix for his guidance and insight on this article.

Topics: breakeven business performance business results critical success factors revenue drivers