Adrian Goodman
A business ‘just ticking over’ is in a dangerous place. Do not fly blind - use data to guide your decision-making based on facts, not feelings, says chartered accountant Adrian Goodman.
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I TALKED last time about the difference between the strategies that a struggling business should use, compared to those that suit a growing business. But the real challenge is this: how do you know which one you are?
It is easy to spot the extremes. If your business is highly profitable with cash in the bank and a healthy pipeline, you are clearly in growth mode. If you are scraping together payroll each month and juggling supplier payments, you’re likely in survival mode.
But what about the grey area in between? Many SME owners assume they are just ‘ticking over’. Here is the uncomfortable truth: there is no such thing.
All businesses are either growing or surviving. If you are not actively pushing for growth then you are on the back foot, whether you realise it or not.
And this matters. A lot.
Because growth mode and survival mode require very different tactics. Growth mode means sales, marketing, hiring, investment. Survival mode means cutting costs, negotiating with suppliers and getting lean.
Misdiagnosing your position and using the wrong tactics is one of the most dangerous mistakes a business owner can make.
So how do you diagnose your current state? The answer: Data.
You need to know your gross profit margin, net profit margin, break-even point and margin of safety. You need budgets and management accounts to provide comparatives.
You need consistent, accurate financial reporting that allows you to track trends, evaluate performance and assess economic viability.
Too many business owners fly blind, relying on gut instinct or the current bank balance to tell them how things are going.
That is like checking the weather by sticking your hand out of the window instead of looking at the forecast. You might survive short-term but you are not planning. You are reacting.
And that is no way to run a business.
Then comes interpretation. A 12% net margin might look good – unless you were at 15% last year or the industry average is 25%. Your data needs context. And you need to regularly review your benchmarks to avoid complacency.
Once the diagnosis is clear, the strategy becomes obvious.
If you are in growth mode, focus on driving revenue. As long as your margins are healthy and overheads are controlled, every pound spent on marketing, sales and customer acquisition pushes profit further.
Yes, keep an eye on costs but your primary job is to pour fuel on the fire.
If you are in survival mode, do not even look at the sales plan. Generating sales costs money… and you have not got any.
First, improve your margins: cut waste, renegotiate contracts, reduce overheads. Once you are stable and cash starts building, then (and only then) should you think about growth again.
Get this wrong and you undo all your hard work. Switch too early and you will drain your reserves. Switch too late and you will miss your window. Timing and tactics are everything.
Diagnosis is not a one-off exercise. It is a habit. Businesses evolve so your tactics must evolve too.
The smartest business owners make diagnosis part of their monthly rhythm: review the numbers, ask the hard questions, adjust the strategy.
Growth or survival is not just about where you are now. It is about where you are heading and whether your actions are getting you there.
As always, if you need support with any of these elements, PPX is here to help.
Adrian Goodman is managing director of PPX Consulting and author of Achieving Profitable Growth: Use the ‘Four Points of Control’ to grow your profit and your business. Available on Amazon.
Online Excel training at ppxtraining.co.uk/practical-excel-skills/
Find out more at
ppxconsulting.co.uk | | 01536 904 886
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