24/08/2022
When the going gets tough, the tough get changing. But how?
Plenty of folk will offer you suggestions on what to do in a tougher market. However they don’t always have the right credentials to do so, having never worked in a downturn in the UK.
Find someone who has walked the walk if you are seeking advice. It doesn’t have to be me, but for what it’s worth, I have come through several problem markets, so I’ll share a few tips over coming days about surviving and thriving.
I’m not writing off 2022 and beyond as being as hard as some of the previous lulls but you’d be emulating an ostrich if you didn’t look ahead and assume some extra challenges are likely (and, by the way, if they don’t materialise, these “tougher times tips” will stand you in good stead whatever the market conditions).
So, don’t bury your head in the sand.
Today’s tip is “Know your numbers”.
If sales income shrinks, you are unlikely to be able to instantly reduce costs by the same proportion, but the sooner you take action, the more you’ll save.
Conduct a diligent and detailed costs analysis. Make a list of the “must have” and “nice to have” elements. What could you cut if and when you needed to? Talk to suppliers about their charges - can they help? Are there contracts you could renegotiate or end? If you lease a premises, maybe your landlord might take a sympathetic view on rent? Where are you spending money unnecessarily?
Once you know your real costs, you’ll know your income target. For us in 2008/9 it was as simple as breaking even. We did that and more, coming out bruised but intact.
In a sales operation, the “Cascade Process” is key. If you need £24,000 of income a month and your average fee is £3000, you need 8 completions a month (this is rudimentary and you need to factor in VAT of course).
But if you need 8 completions, you’ll know (from your average fall through rate) how many sales you need to agree each month, say 11 in this hypothetical case.
If you sell two thirds of what you take on (this will vary geographically and as the market changes) then you’ll need circa 17 instructions to sell the 11.
And depending upon conversion rate from valuations to instructions (again hugely variable) at maybe 50%, that means you need 34 valuations a month to translate into the £30,000 required income further down the line.
This business now knows that survival is linked to going through 34 fresh front doors each month. That becomes the absolute essential target because without it, the £30,000 income won’t happen.
Key daily focus and activities to spot, convert and/or create the necessary valuation appointments then take precedence.
Success in any market is linked to having the right quality and quantity of stock. A cost analysis and the Cascade Process are the foundation of everything else you need to do, which I’ll cover in future posts.
Have a marvellous day🙏
